* Buying of German govt bonds hits all-time low
* France and Italy pick up slack
* ECB deviation from its capital key:
* tmsnrt.rs/2sIqskg (Writes through)
By Francesco Canepa
FRANKFURT, Sept 4 (Reuters) - The European Central Bank bought fewer German bonds in August than in any month since the start of its stimulus programme, data showed on Monday, suggesting it was holding back to avoid running out of debt to buy.
The ECB has been buying fewer German and more Italian and French bonds than it is supposed to for months and may need to deviate from national quotas even farther if it decides to extend its 2.3 trillion euros ($2.74 trillion) money-printing scheme past the end of the year.
ECB President Mario Draghi is due to provide a policy update on Thursday but no decision on the future of the quantitative easing (QE) programme is expected until October or even December.
August data showed the ECB and the Bundesbank bought just 9.803 billion euros worth of German public-sector bonds, 331 million euros fewer than the rules of the programme dictate and fewer than at any point since QE’s launch in March 2015.
France and Italy, on the other hand, enjoyed purchases that were 1.3 billion euros and 725 million euros above their respective quotas, which depend on the size of their shareholding of the ECB.
The Reuters calculations based on ECB data exclude Greece, which has never been part of QE due to its low credit rating.
Overall, the ECB bought 42.8 billion euros worth of public sector bond in August, a month when trading becomes harder due to many investors being on holiday, a fall of roughly 9 billion euros from the month before. ($1 = 0.8392 euros) (Reporting By Francesco Canepa Editing by Jeremy Gaunt)