ECB QE could theoretically surpass €2 trillion according to reported program details - page 5
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The European Central Bank (ECB) is free to adjust its QE framework if the economy and price growth advances faster than expected, Yves Mersch told German paper Boersen-Zeitung in an interview published on Tuesday.
"If we were to see that this process brings us to our goal earlier, then we are naturally not so tied to our decisions that we could not adjust things," Mersch, who sits on the six-member Executive Board that forms the nucleus of the ECB's rate-setting body.
"In neither direction are we resistant to reality," he said.
Plan adjustment
March ECB staff forecasts for inflation see price developments moving closer to target by 2017, Mersch suggested.
"Should we see that we are overheating then of course it would be appropriate to ask whether we should adjust out plan," he added.
He also warned against using the weakening euro as a tool to lift the bloc's competitiveness, warning that this would breach EU law.
sourceHere it comes : QE2 already announced
ECB QE cause massive sell-off of Euro by CBs : its share in CBs reserves dropped from 28% to 22% in just one month - that is equal to disaster
Draghi No Longer Bernanke’s Best Friend
We ran into this complication during Bernanke’s partial “confession” about his brand of QE, namely that what failed was not the power of the Fed overall but rather to extend the power of the Fed beyond merely the financial. He is trying to claim that QE wasn’t really impactful after having totally assured anyone who would listen contemporarily that it was beyond potent. The evidence in the US suggests this dichotomy where asset bubbles are tracing to these financial susceptibilities but that asset bubbles aren’t much help especially those not directly within their line. For all that was amassed under its umbrella, we still cannot tell if the economy in the US has recovered while it now teeters close to another potential abyss.
The experience of Japan is well on its way, with Nikkei 20,000 celebrations aside significantly downgraded wages, to likewise proving this limited range. It is entirely too early in Europe to suggest definitively about that economy, but all indications so far at least provide more evidence that QE does indeed have enormous and distortive financial properties.
In Europe, QE has been so powerful that it has already been scaled back without much applause from the usual commentary.
More than one quarter of the securities in the Bloomberg Eurozone Sovereign Bond Index have yields below zero, data compiled by Bloomberg show. France’s five-year note yield fell as low as minus 0.004 percent on Friday.
As part of its quantitative-easing plan, the ECB has pledged to buy 60 billion euros of assets, including government bonds, on a monthly basis through September next year. The central bank reported buying 41.68 billion euros of sovereign debt in March. Policy makers are next set to meet on April 15 in Frankfurt.
In other words, March’s buying pace was only about two-thirds the intended value, even factoring that the ECB didn’t start right on March 1. Despite undershooting intentions, these monetary fingerprints are still all over the continent.
Germany’s bund curve has depressed even beyond the depression levels that have existed since December. There is clearly an effect, as even the 10-year moves toward zero indicating the fact that the ECB has almost eliminated (what was left of) the time value component of financial benchmarks in a matter of just months. And it isn’t just Germany, as even the Swiss, who were for a time seemingly delinked from this mess, are seeing the same longer end compression even though the ECB doesn’t apply and the SNB delinked from the euro almost three months ago.
Further, interbank rates in Europe continue to slide, too. Eonia keeps drifting lower into negative rates, a condition that actually and significantly denotes the opposite of what the ECB intends. In other words, there isn’t as much ambiguity in a negative Eonia as there might be in a negative 7-year German bund.
Eonia is an unsecured rate which is supposed to anchor to the ECB’s MRO corridor midpoint, which is a secured, repo rate. To have a deepening negative spread indicates, again without vagueness, that “money” “markets” in Europe remain profoundly unhealthy and are getting more so despite the “tonic” of QE.
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Euro fell from 28% to 22% in world CBs reserves in just one month since this QE nonsense started.
GOOD deal Draghi : you are doing exactly what your bosses (Goldman & Sachs) told you to do. One single man is going to kill Euro. I hope you are getting a tap on your head for your bone fetching task completion
Riksbank's Ingves: ECB Causes Me Headache
The 'extremely expansive monetary policies' embraced by the ECB are impacting the Swedish crown in undesirable ways, Riksbank Governor Stefan Ingves said on Monday.
Sweden's central bank is increasingly concerned about the impact of the European Central Bank's (ECB) policies on the nation's currency, the bank's Governor Stefan Ingves (pictured) told WirtschaftsWoche magazine in an interview published on Monday.
"The ECB is operating extremely expansive monetary policies," Ingves told the German paper.
"We don't want our currency to appreciate too strongly and push import prices down. That speaks for negative interest rates," he said.
The Swedish crown was traded 0.06% lower at SEK 9.3612 against the euro during the mid-European session.
Krona headache
His comments came amid worries that an appreciating crown would reverse a recent upturn in consumer prices and raise the intensity of deflation damaging Sweden's growing economy.
Therefore, the Riksbank has already cut interest rates into negative territory.
Speaking further, Ingves added that Sweden will not enter the euro zone for the foreseeable future. "That issue is politically dead at the moment," he said. "There is no majority in Sweden to enter the euro zone."
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ECB Recap: Confetti Flies
As widely expected, the European Central Bank opted to keep interest rates unchanged, with the refinancing rate (0.05%), deposit facility rate (-0.2%) and marginal lending rate (0.30%) all on hold in the wake of its April policy meeting. Despite the ho-hum decision, there were some unexpected fireworks (or more accurately, confetti) in ECB President Mario Draghi’s subsequent press conference.
Draghi’s mettle was tested early in his speech, when he was attacked by a confetti-wielding protestor chanting “End ECB Dictatorship!” Thankfully, the ECB President was able to quickly recompose himself and complete his opening statement without too much interruption. Cool as a cucumber, Draghi exuded a calm confidence about the efficacy of the ECB’s QE program to stimulate the Eurozone economy and optimism that the current issues with Greece would soon be resolved :
In essence, Draghi “stuck to the script,” shooting down any suggestion that ECB was planning on winding down its QE program prior to the promised 18 months (September 2016) or imminently planning on expanding the program. Beyond the early protest, the press conference passed with minimal drama.
Market Reaction
The immediate reaction to Draghi’s press conference is somewhat subdued, mirroring the lack of new insight into the ECB’s intentions. EUR/USD has edged up from about 1.0600 prior to the press conference to 1.0655 as of writing, but that is more attributable to weak US data released at 9:15ET, rather than anything Draghi said. Meanwhile, US and European equities are trading up about 0.5%, and German 10-year bund yields continue to hit new record lows at 0.12%.
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Ptty that something else did not fly - confetti are way too good for Draghi
Ptty that something else did not fly - confetti are way too good for Draghi
The man is just doing what he is ordered - from his Goldman & Sachs bosses
ECB's Coeure says Eurozone recovery remains insufficient
Yada yada
EURUSD 1.0693 on general USD-buying but euro also lower overall so far this morning as Greece continues to cast its shadow
Europe’s Debt Erases $160 Billion on Path to Record Weekly Loss
Investors revolting against negative yields in Europe wiped 142 billion euros ($160 billion) off the value of the region’s government bonds this week, heading for the biggest selloff since at least October 1993.
With Bill Gross and DoubleLine Capital’s Jeffrey Gundlach among investors saying its time to sell bunds, the value of European bonds dropped to 5.75 trillion euros Thursday, the least since March 4, Bank of America Merrill Lynch data show. Germany’s 10-year yields completed their biggest two-day climb since November 2011 as signs of euro-area inflation prompted traders to pare bets the European Central Bank’s quantitative easing will drive up prices on the continent’s benchmark debt.
“Yields had gotten to levels where any investor who had discretion around where they want to put their money would not want to own these bonds as a long-term proposition,” said Peter Jolly, the Sydney-based head of market research at National Australia Bank Ltd., the nation’s largest lender by assets. “It was always unreasonable to my mind that, just because the ECB was buying bonds, that yields had to be jammed to the floor.”
German 10-year yields surged 20 basis points, or 0.2 percentage point, in two days to close at 0.37 percent on Thursday. That’s up from an unprecedented 0.049 percent reached April 17.
The ECB’s 1.1 trillion-euro quantitative-easing program gives cause to avoid the region’s government bonds, said Steven Wieting, global chief investment strategist in New York at Citigroup Inc.’s private bank. Wieting said on April 29 the bank cut allocation to German bunds in favor of U.S. Treasuries in the five- to seven-year range.
Avoiding Herd
“There is no reason to accept negative yields for the same reasons that institutional investors might,” said Wieting, whose funds hold a smaller amount of bunds than indexes recommend. Since his bank advises some of the world’s most affluent families, with assets that total $374 billion, Wieting isn’t required to hold easy-to-trade sovereign debt. “Private-wealth clients don’t need to follow that particular herd.”
Wieting said the effect of quantitative easing in Europe can be seen by looking at the U.S. experience of the past four years, when record stimulus boosted stocks and corporate bonds and made government bonds more expensive.
The Bank of America Merrill Lynch’s Euro Government Index peaked at 5.93 trillion euros in market value on April 15, up from 5.55 trillion euros at the end of 2014.
“The market got too set on the idea that German bund yields would go to zero based on ECB buying,” said Roger Bridges, Nikko Asset Management Australia’s chief global strategist for interest rates and currencies in Sydney. “I think we got to levels where people were saying the risk-return is not here.”
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