June 6
Breaking down the TLTRO – FT
A reasonable boost for
the periphery then even if net additional liquidity (due to rollovers and LTRO
repayments) is still an open question and worries about the efficacy of the
ECB’s own Funding for Lending Scheme are likely to keep the boost minimal — AQR,
capital concerns may keep banks cautious, even if they wanted to lend away
there is a demand and deleveraging issue, while larger corporates have been
heading to capital markets at an increasing rate anyway.
Draghi Faces Off With Regulators Over $2
Trillion Market for Tricky Debt
– BB
Mario Draghi is on a
collision course with regulators as he seeks to revive Europe’s asset-backed debt market to boost lending to
businesses.
What Mario Draghi Did Today: Goldman Sachs
Explains – ZH
It is difficult to say
with certainty at this stage what the net effect of these different measures
will be on lending and the economy. But the ECB has clearly bought itself time
before engaging in further measures. The next step will be outright purchases
of ABS, for which the “preparatory work has been intensified”. There was no
indication that the Governing Council was moving closer to a large-scale asset
programme, even though it was not ruled out.
ECB tries to please everyone, but fails – TradingFloor
The ECB tried to
please everyone by deploying all of the tools at its disposal with the
exception of quantitative easing. Unfortunately, the package leaves plenty of
loose ends and unanswered questions.
Jury out on ECB's negative interest rate – TradingFloor
Everybody is trying to
work out what the ECB did yesterday. The much-needed reparations to structural
economic black holes, unemployment, real inflation and the like will not be
achieved.
A look at today's ECB action - without the hype – Sober
Look
June 5
The European Central
Bank has unveiled a package of extraordinary measures that policy makers hope
will help the currency bloc to stave off the threat of deflation.
Draghi Unveils Historic Measures on Deflation
Threat – BB
Mario Draghi unveiled
an unprecedented round of measures to help the European Central Bank’s
record-low interest rates feed through to an economy threatened by deflation.
ECB hurls cash at sluggish euro zone economy,
seeks to force bank lending – Reuters
The European Central
Bank launched a raft of measures on Thursday to fight low inflation and boost
the euro zone economy, cutting rates, imposing negative interest rates on its
overnight depositors and offering banks new long-term funds.
“If need be, we are
not finished here,” he said. One big question, unanswerable, lingered after the
press conference ended: Will it be enough?
ECB enters unchartered territory - with one
foot – Merkelnomics
Today’s measures are
not yet a whatever-it-takes moment for the Eurozone economy but they are at
least a good package which will give the Eurozone some additional monetary
tailwind.
Stocks Hit Record Highs As Bonds & Euro
Shrug At ECB – ZH
The most critical
asset to be impacted by the ECB - EURUSD - is not reacting and is now actually
higher than before Draghi unleashed his mini-LTRO.
ECB shows activism but falls short of true
QE – Bruegel
We welcome that the
ECB has finally acted with a broad package. We also think that unanimity on the
package was a very positive development and sends a strong signal of unity. We
expect the package to have a positive effect, however, it will take quite some
time until inflation dynamics will come back to where they should be and
further measure will likely be needed. A more aggressive QE (including €35bn
purchases of ESM/EFSF/EIB bonds, corporate bonds and ABS) would have anchored
inflation expectations more quickly as portfolio re-balancing and exchange rate
channels would have operated immediately.
Draghi's Action Plan Cheat Sheet: "Not
Many Options Left" – ZH
Draghi does not have
many options left. Think QE is coming anytime soon? Think again, says Morgan
Stanley...
Draghi has yet to banish the threat of
deflation – FT
The acid test will be the
path for inflation in coming months…so one test of success lies with the
performance of the euro in coming months… As with 1990s Japan, deflation remains a big risk partly because
no one is prepared to admit it could really happen.
5 Takeaways From The ECB’s Moves on Rates – WSJ
Negative Deposit Rate
* Banks Are Being Encouraged to Lend * It's Working on Asset-Backed Securities
* There's a Sort of 'Mini-QE' * But No Full QE
The ECB Stops Sterilizing Its SMP – At A
Glance – WSJ
By halting
sterilization the ECB is, in effect, delivering its own QE, albeit a relatively
modest amount. As of the end of May, outstanding SMP assets totalled €164.5
billion ($223 billion). Next to other central banks’ total purchases this is
small beer. But it reverses recent declines in euro-zone liquidity. And, more
importantly, establishes a precedent for ECB QE.
Very Nice Mr Draghi, But Will It Work? – WSJ
While the ECB produced
a bigger show than many people were expecting, there might be less substance to
it than many had hoped.
The waiting is over – The Economist
The ECB has certainly
done a lot today, but its measures look insufficiently potent to break the
spell of “lowflation”…If the ECB does find that its June package is inadequate
to do the trick, then it may find that it has to adopt quantitative easing and
to buy assets on a large scale by creating money just as other big central
banks, such as the Fed, have done. The worry is that it may reach that
conclusion too late, making a possible lurch into deflation more likely, which
would be particularly pernicious for the euro zone since many parts of it are
burdened by excessive private debt as well as public debt.
Why the Euro Is Stronger After ECB Went
Negative – WSJ
Without matching the
bazookas of the Fed/BOJ/BOE/PBOC, however, the ECB is still condemning itself
to a strong euro, which will undermine European producers’ competitiveness and
keep import prices low. The euro zone will continue to import deflation from elsewhere,
ensuring that Mr. Draghi’s fear of a Japan-like “pernicious negative spiral”
won’t go away.
How Hedge Funds Are Trading the ECB’s Moves – WSJ
ECB’s Measures: New Twist on Old Tune – WSJ
There’s no doubt the
ECB’s package of actions Thursday is significant, but the measures are all
variations on things the ECB has tried before. One potentially significant
option, large-scale asset purchases known as quantitative easing, remains
unused in the toolbox. Thus, it is by no means certain that the ECB’s latest
plan will boost inflation and growth in the euro zone.
The ECB Needs to Get Its Crazy On – WSJ
Mario went negative,
but he didn’t go crazy. That may end up being a problem. “The ECB’s timidity on
Thursday does nothing to calm fears the ECB will continue to do too little, too
late”
The ECB is doing about
as much as the northern Europeans will let it. Draghi has to keep figuring out
how to get them to do even more—or Europe will
keep turning Japanese.
ECB’s Draghi Finds it Hard to Remember What
He’s Never Done – WSJ
The OMT program has
never been used, and no document has ever been published by the ECB setting out
how it would be used. And to be fair to Mr. Draghi and Mr. Constancio, it’s
difficult to remember what you’ve never done, right?
Implications of the ECB easing measures – Danske
Bank
While it is difficult
to judge how much the TLTROs will indeed boost liquidity we believe it will be
by
a significant amount.
The combination of negative rates and rich liquidity will support performance
in peripheral markets, lead to lower money market fixings, steeper yield
curves, higher break-even inflation and lower EURUSD cross currency basis
ECB: "We are not finished" – Nordea
ECB delivered a whole
package of measures just as we expected. As a result, longer core yields
initially rose, the curve steepened and the euro depreciated. We see more
upside potential for long yields, but expect EUR/USD to rebound soon. As it
will take a long time to see the effect of the measures announced today, the
ECB will be very reluctant to jump into any QE programme any time soon, but the
ABS programme will be added to the stimulus package later.