One reason why the PEPP was so powerful was its flexibility, which allowed the ECB to provide liquidity when and where it was most needed. Purchases were allocated flexibly across time, asset classes and jurisdictions. Just like the OMT, which was never used, the PEPP’s backstop function worked primarily via the confidence channel.
Flexibility only had to be used briefly at the peak of the crisis. After that, the mere existence of flexibility and our clear commitment to use it when necessary were sufficient to coordinate markets on the “good” equilibrium. But while the PEPP was able to stabilise markets, it could not sustainably reverse fragmentation by itself.