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In Europe 27th June 2014

ECB – Most likely done now

ZURICH | By UBS analysts | On 5 June, the ECB delivered a comprehensive monetary policy package, comprising cuts in the refi rate (from 0.25% to 0.15%), the deposit rate (from zero to -0.1%) and the marginal lending facility (from 0.75% to 0.4%). The ECB also rolled out the ‘full allotment mode’ – the commitment to supply unlimited liquidity (against adequate collateral) at the refi rate – from July 2015 to December 2016, and it will inject liquidity by ending the sterilisation of the Securities Markets Programme (SMP) portfolio. 

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Markets 26th June 2014

Biggest EU banks show poorest Q1 results in 5 years

MADRID | The Corner | The first quarter of the year is usually the best for lenders, and yet major European entities are showing the weakest results since Q1 2009:  net profit fell once more (-9% yoy) to a pale EUR 12, according to a report by Deutsche Bank Research. Potentially high litigation costs and the upcoming ARQ and ECB’s stress tests make them eager to strengthen their capital buffers.

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In Europe 24th June 2014

The TLTRO clashes with the old LTRO

MADRID | The Corner | The liquidity net increase of the new measures by the ECB may be substantially less than expected, because of two main reasons: as a consequence of the 3-year LTRO maturity next December and February, and due to the improvement in the workings of the money markets.

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In Europe 24th June 2014

The euro goes negative

NEW YORK | By Dickson Buchanan Jr. via Truman Factor | The European Central Bank’s (ECB) decision to charge a negative interest on overnight deposits is not going to lead to a higher targeted inflation rate, despite ECB President Mario Draghi’s insistence that it will. Like all cases of central planning, this decision will have unintended and costly consequences – some of which are already starting to play out. 

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In Europe 18th June 2014

TLTRO: An X-Ray

MADRID | By Carlos Díaz Güell | Last week’s greatest news for SMEs were the Targeted Long Term Refinancing Operations (TLTRO), variety of LTROs that got a T standing for target. Banks will be allowed to borrow money at 0.25% interest rate at 4 years max.

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Markets 11th June 2014

Debt markets’ rally triggers bubble concerns

MADRID | By Francisco López | It is not the first time economists, analysts and authorities recently talk about a possible bubble in the debt markets. But the latest, strong drops in peripheral bonds, in all-time minimums, have prompted alarms: there is too much euphoria and fixed-income market’s last moves doesn’t make sense.

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In Europe 11th June 2014

Easy money, stronger currency?

LONDON | By Chris Walker and Marvin Barth at Barclays | Despite the ECB delivering more easing than expected, the EUR remains close to the levels heading into Thursday’s meeting. Did the ECB then fail? In a word, no. The ECB’s objective is to raise inflation from unacceptably low levels well below its mandate of “less than but close to 2%” and a crucial element of doing so is to keep inflation expectations anchored near the Bank’s target.

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Markets 10th June 2014

Why ECB’s measures may not fix lending nor inflation

MADRID | The Corner | Despite markets’ euphoric celebration of Mario Draghi’s last words, some remain skeptic about them being the panacea for inflation and the lack of credit in the eurozone. Check the graph above: 5-year swap rates show that inflation expectations have only gone from 1.21/1.24 in May to 1.28/1.24. in June. Nothing to go crazy about, huh?