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Markets 11th December 2014

TLTRO 2: Poor results highlight ECB’s increasingly large to do list

MADRID | The Corner | As expected, the impact of the ECB’s second TLTRO, aimed at spurring credit to SMEs, was smaller than expected. Eurozone banks asked for €129.8 billion ($161.29 billion) in four-year loans, more than the nearly €83 billion provided in the previous offer in mid-September, but below the €150 billion expected by market watchers. Some believe this will increase pressure on Frankfurt to launch broadened QE on 22 January, the scheduled date for the next ECB meeting.

 

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Markets 9th December 2014

Next TLTRO may reach €160 billion

MADRID | The Corner | All markets eyes are set on the ECB’s second offer of cheap four-year loans (TLTRO), which will take place next Thursday and are aimed to revive the eurozone’s battered economy and try to boost lending to SMEs. As a matter of fact, this second round will be important as any decision about launching a QE program will be influenced by how the banks respond to Thursday’s liquidity open bar.  

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In Europe 6th December 2014

Hawks and Doves in the ECB

MADRID | By Luis Arroyo | The British multimillionaire Gavyn Davies, former partner at Goldman Sachs and former chairman at the BBC, gave an excellent analysis of the insurmountable differences within the ECB’s Governing Council between Mr Draghi and Mr Weidmann. In the FT macroeconomics blog, Davies says that the distance is greater than the one between the Fed’s “hawks” and “doves”. Mr Draghi is doctrinally closer to Mr Bernanke; meanwhile Mr Weidmann is much more aligned to the right wing than the Fed’s “hawks” –so much so that it seems he represents the Austrian school. 

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Markets 5th December 2014

“The ECB is almost apologetic about the lack of growth and the weak inflation”

MADRID | The Corner | According to Patrice Gautry, chief economist at UBP, there is little doubt that monetary policy – due to be presented in detail at the beginning of next year – will be revised and reshuffled as follows: 1) bigger ECB spending; 2) more of a focus on private and public bond purchases rather than on LTROs and ABS and CoCo purchases.In short, broadened QE should kick in on 22 January, at the next ECB meeting.

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Markets 5th December 2014

Draghi in drag

SAO PAULO | By Marcus Nunes via Historinhas | The European Central Bank opened the door to a dramatic escalation in its campaign to stimulate the eurozone’s stagnant economy early next year, signaling a new chapter in the bank’s fight against excessively weak inflation in the heart of Europe. ECB President Mario Draghi said after the bank’s monthly meeting that officials discussed purchases of government bonds, known as quantitative easing or QE, but that they needed more time to gauge the effects of policies that they have already implemented while assessing how falling oil prices may affect the bank’s consumer-price outlook.

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Markets 4th December 2014

“No need for unanimity” for QE

MADRID | The Corner | The ECB avoided taking any new measures to fight stagnation in the eurozone, although its growth forecast is significantly lower than 3 months ago. As Mario Draghi announced on Thursday, the Frankfurt-based institution intends (he said, using that word instead of ‘expects’) to expand its balance sheet by $1Tr, yet it won’t act before 2015, as many were expecting. A sovereign QE, despite the Bundesbank’s opposition, is a closer possibility, but the Governing Council will wait until next year to assess the impact of the existing policy measures and of falling oil prices.

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Markets 4th December 2014

What if before the sovereign QE, the ECB launched a corporate bond purchase plan?

MADRID | The Corner | Even though the sovereign QE is present in the markets’ dynamics, it is likely that the ECB will first bet on a program of corporate debt purchase and then wait to see what happens. Experts at Morgan Stanley say that the likelihood of this plan is 30% and that it would have an impact on the households’ wealth as well as providing greater financial stability. However, the program would also have problems when it finishes, because equities don’t expire and the ECB wouldn’t be able to have those shares ad infinitum.

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Markets 3rd December 2014

ECB preview: Not yet

Guest Post by  Thomas Harjes and Fabio Fois (Barclays) | Despite the softer November inflation print and some likely downward revisions in the ECB’s inflation and growth outlook next week, we do not expect the ECB to announce further policy easing when the Governing Council meets on Thursday, 4 December. We believe the ECB is going to wait at least another month. 

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Markets 1st December 2014

Markets take ECB’s QE for granted

MADRID | The Corner | Inflation in the eurozone is not picking up. Expectations aren’t either. And the ECB’s balance sheet expansion is almost inexistent. PMI indicators (which the central bank is closely watching) are trending downwards. In this context, Barclays analysts comment, it is not strange that markets are expecting more QE from the Frankfurt. But when? Probably not this week.