ECB QE could theoretically surpass €2 trillion according to reported program details - page 3
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ECB QE Has Barely Just Begun, and We've Already Seen Massive Moves in Government Bond
The European Central Bank started purchasing euro-area sovereign debt on Monday, March 9. To say the moves since then in both sovereign bond yields and the euro currency have been dramatic would be an understatement.
This chart shows the current yields on 10-year bonds in the euro region and where those same yields were last Friday. German 10-year yields have dropped from 0.391 percent to just over 0.2 percent. Spanish and Italian 10-year yields have come close to breaking under 1 percent for the first time.
The euro currency has weakened significantly, falling to a low of $1.0495 early this morning before recovering to $1.0630. This is a 3.5 percent fall since Friday's open.
These massive moves come amid €9.8 billion ($10.4 billion) of purchases since Monday, according to ECB board member Benoit Coeure, who was speaking in Paris today.
ECB will cause a disaster. If FED does not step in (not with rate hikes, but rate cuts) ECB will single handedly ruin the middle class in Europe
ECB QE Week 1: Germany 3, Greece -9
And so thefirst week of Draghi Open Market Operations (DOMO) ends and while yields have been pushed lower, the benefits of massive money printing are very much skewed to The North and not The South. Spanish sovereign bond risk ended the week unchanged (not exactly the exuberance Draghi hoped for) and Italy only 2bps lower. In equity land, the divergenes were enormous -German stocks soared to new record highs (up 3% this weekand 21% year-to-date) as the rest of the majors rose less than 1%. Spanish stocks fell 0.6% but Greek stocks cratered over 9% on the week. Inflation breakevens also fell 6bps on the week...and Europe's VIX rose 0.3 to 18.85... oops.
A divergent flood of capital to Germany...
It started - and it has been known for long before it started what shall happen. People are sheep - always thinking that it will happen to others not to them
When Even Varoufakis Mocks The QE "Wizard", The Game Is Almost Up
Last Wednesday, Mario Draghi and ECB chief economist Peter Praet had a clear message for critics of PSPP: we’ll keep printing money forever if we have to, but in the end, this is going to work. As skepticism grows regarding not only the soundness of the philosophy that underpins QE, but about whether the structure of the ECB’s asset purchase program is even viable, the central bank remains defiant to the end and indeed Praet doubled down on the rhetoric last week, noting that the ECB would “use all tools available” to ensure that “monetary dominance prevails.”
That kind of language may be good for morale in some circles, but a growing number of critics are suggesting that perhaps the world would be better off in terms of financial stability if the powers behind “monetary dominance” would let the market prevail for once so that some semblance of price discovery could begin to reassert itself. We’re a long way from that though and in fact, the outlook for euro money markets is anything but normal as Barclays made very clear last week. Here is our summary of their take on the market:
Meanwhile, the bund curve has a date with outright flatness and the ECB, by driving yields on even half-decent credits negative, is setting itself up to onboard hundreds of billions in negative yielding assets onto its balance sheet, guaranteeing a loss if held to maturity and we won’t even begin to speculate on what the paper losses will look like on a trillion euro portfolio of bonds purchased at 124% of par if either the central bank loses control of the narrative or some tail event (like a Grexit, or a Podemos-inspired Spexit) triggers a repricing of periphery risk.
In sum: the world’s central banks are playing a trillion dollar/euro/yen/soon-to-be-yuan game of poker where every player at the table is pot committed and has no choice but to go all in.
If you want to understand just how precarious the situation is, just ask Greek FinMin Yanis Varoufakis, a man who knows something about how to create and aggravate precarious situations: The irony there is that Greece could definitely use some help in the way of outside demand for its sovereign debt and by criticizing QE, the FinMin is essentially shooting himself in the foot. Varoufakis — apparently not wanting to ruin his newly minted image as a man who is loving life right now — did note that he wasn’t trying play the role of the “party pooper” (he actually said that). We, however, will play that role by pointing out that Varoufakis is exactly right when it comes to runaway QE producing unsustainable equity rallies as evidenced by the following:It’s so simple and obvious, even a Greek FinMin can figure it out.
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They will print as long as they think that they need more. And they will lie about the inflation. Same old story
How much will the ECB's first QE shopping bill be today?
ECB announces amount of QE purchases at 14.45 gmt
We our first official taste of how much the shopping trip to the Government bond supermarket cost the ECB as the release the details of purchases to date.
On the first day of QE on the 10th, ECB's Coeure said that €3.2bn had been purchased, which was higher than the €25-50m the market was rumoured to be thinking of. On the 12th he then said that the total had risen to €9.8bn.
Last Thursday we seemed to have a bit of a pause in the euro and yields rose through Thursday and Friday, which suggests that the ECB may have tailed off some buying.
We're probably looking for a number around €12-15bn later. That's my guess rather than anything we've heard. Given that they are looking to spend €60bn per month, and started a week into the month, they've got two and a bit weeks to fill another €45-50bn.
One thing we'll have to watch is how the euro reacts to the announcement and how it views the purchasing progress. We can probably roughly assume that the ECB will be buying around €15bn per week based on an average 4 week month. If amounts come up short of what the market estimates that might see the euro move.
Let's have a little game to guess how much they've spent so far. Stick your guesses in the comments and we'll see who's King of the shopping trolley. We'll go on the exact amount to 2 decimal places so if it's €15.268bn we'll round it to €15.27bn
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we shall see what Will Draghi tell today. The funny thing will be that printing the money could cause Euro to rise
ECB Buys 9.75 Billion Euros of Public Debt in New Era
The European Central Bank embarked on a new monetary-policy era by settling purchases of 9.75 billion euros ($10.3 billion) of public-sector debt last week.
The ECB announced on Twitter its first weekly statement showing buying of government and agency debt by the region’s central banks, part of a stimulus plan to acquire 1.1 trillion euros of assets through September 2016. The figure covers only part of the week as it takes time to settle the purchases, and signals the Frankfurt-based institution is on track to meet President Mario Draghi’s pledge to buy 60 billion euros of assets this month.
The ECB’s Governing Council approved quantitative easing to fight the threat of euro-area deflation against opposition from Germany, the region’s biggest economy. Bundesbank President Jens Weidmann said last week that his institution, which should make the biggest share of purchases, is playing its part and bought 2.1 billion euros of German bonds in the first three days.
“There’s little doubt that the ECB will meet its target and make true on its promise,” said Frederik Ducrozet, an economist at Credit Agricole SA in Paris. “We don’t have many details yet on the purchases and it will be interesting to see the breakdown by countries and maturities.”
The ECB will publish more information, including details of bond maturities, on a monthly basis starting in April. Executive Board member Benoit Coeure said last week that the average maturity of purchases in the first three days was 9 years.
Negative Yields
Unlike earlier programs by the U.S. Federal Reserve and Bank of England, the ECB’s QE must deal with a market where a large share of bonds have negative yields. That means central banks buying debt on which they expect to make a loss.
While Draghi has said the ECB can buy bonds with yields as low as the deposit rate, currently at minus 0.2 percent, policy makers have failed so far to agree how to share those losses.
Debt securities from nine euro-area members, including Germany and France, or more than a quarter of the 346 securities in the Bloomberg Eurozone Sovereign Bond Index, trade with a negative yield as of today.
Austria’s central-bank governor Ewald Nowotny told Bloomberg News on March 11 that making foreseeable losses threatens to damage the reputation of the region’s central banks. Weidmann has indicated that the Bundesbank has purchased bunds with negative yields.
Under the asset-purchase program, the ECB and national central banks also buy agency debt such as securities from the European Investment Bank or Germany’s KfW development bank, asset-backed securities and covered bonds. As of March 13, the ECB’s outstanding settled purchases of ABS rose to 3.75 billion euros and its purchases of covered bonds climbed to 56.95 billion euros, the central bank said.
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I cannot believe the idiocy that continues here. Actually for some people, it's not idiocy, it's looking to be the beginning of what they did in the U.S.