MADRID | By Soren Willemann at Barclays | European credit markets have been outperforming equities persistently since October 2014. However, following the recent ECB announcements, this relationship has shifted dramatically, with credit spreads now trading wide vs equities on a historical basis.
MADRID | By Ana Fuentes | She believes that central banks should act coordinately, since competition between them can cause currency distortions. British economist and former banker Frances Coppola has been one of the main critics of the European Central Bank’s QE “because it supports asset prices, but that is all it does.” She spoke to The Corner about shadow banking and how financials should be accepting and managing risk on both sides of the Atlantic.
WASHINGTON | By Pablo Pardo | Guess which country pioneered Quantitative Easing in Europe… Exactly: Germany!
MADRID | By JP Marín Arrese | The ECB unleashed a monetary onslaught yesterday aimed at breaking the stubborn deflationary pressures and sluggish growth have shown up to now. The massive artillery barrage mercilessly pounded enemy lines with tons of fresh money, leaving defenders no other option than unconditional surrender. With all ammunition and reserves engaged in this breathtaking D-Day, the ECB would find itself helpless should its gamble fail. As previous landings ended in disaster, the issue now is whether this assault will work as planned.
MADRID | By Ana Fuentes | Amid huge market expectation, ECB’s president Mario Draghi unveiled THE operation aiming to spur growth in the eurozone: the European QE will consist of €1.1tn sovereign bonds purchases, or €60bn a month until September 2016, beginning in March. A crucial move in exchange for low risk sharing (only 20% of bonds purchased by ECB, 80% by national central banks; and Greek bonds are expected to remain out). The euro touched an intraday low of 1.1451 dollars.
MADRID | By Ana Fuentes | Hours before ECB’s president Mario Draghi unveils its big easing program, we spoke to think tank Bruegel central banks’ expert Silvia Merler about an eventual national risk bearing. It could be a way to make QE more acceptable by Germany, she believes, although “it should be traded-off against a significant size” (meaning more than the €50bn purchases per month some market watchers are talking about).
MADRID | By Ana Fuentes | It’s been the talk of the town for months, driving up demand for government bonds in the eurozone, pushing yields to record lows and heating the debate among market makers. And yet nobody knows the scope of the European Central Bank’s next move. The much-awaited quantitative easing (QE) program is expected to be officially announced after 14.30CET today and include controversial sovereign bond purchases of €50-70billion euros per month until the end of 2016. Is the ECB late? Will the ECB manage to spur growth in the eurozone with that amount?
MADRID | By J.P. Marín Arrese | In the OMT case brought before the EU Court of Justice by the German Constitutional watchdog, the Advocate General has delivered a positive opinion. As the Court usually follows such opinions, the last hurdle for implementing the planned QE has been lifted. Yet, the Advocate General sets a number of requirements that will curtail the ECB’s room of manoeuvre.
MADRID | The Corner | ECB staff members have presented models for buying as much as €500 billion ($593 billion) of investment-grade assets, mostly sovereign bonds, according to sources close to the Governing Council. This will amount to an incomplete, partial solution according to some analysts. “It looks like a lot of money, although it won’t be enough” to expand the lender’s balance sheet by €1Tr as is planned, said Alberto Vigil of Barclays on Monday.
MADRID | January 5, 2015 | By Ana Fuentes | Dissensions at the ECB’s the Governing Council are well-known, and still have a long way to go. While some counselors require a truly expansive monetary policy which helps curbing the deflationary expectations, others deny these latter and therefore refuse to go further and define balance sheet expansion targets. Lorenzo Bini Smaghi, who was Member of the Executive Board of the European Central Bank from June 2005 to November 2011, is among those who believe that the ECB can take much stronger action.