ECB might announce sovereign QE at its January meeting, but postpone details till March – ING

FXStreet (Barcelona) - The ING Team expect the ECB to announce QE at its January but hold details till the March meeting, further noting that €500-750bn will have to be bought to reach balance sheet target.

Key Quotes

“We expect the ECB to announce sovereign QE at its January meeting, but postpone the details to the March meeting. A point of contention remains the credit risk on the balance sheet.”

“A sovereign bond-buying programme of the ECB would be very similar to a common bond, with mutualisation of the credit risk. As some countries strongly oppose this option, it looks as if the ECB might initiate the programme, but keep the credit risk located at the individual national banks. While this would be politically more acceptable in the countries most opposed to the sovereign bond purchase programme, it could also make the programme less credible in the view of the financial markets.”

“In any case, we believe that no fixed amount of intended purchases will be announced, since the size of the balance sheet will be the target determining the necessary amounts to be bought. Making a number of assumptions on the impact of the different liquidity-providing operations, we believe the ECB will have to buy €500-750bn of sovereign bonds to come near the desired balance sheet size at the end of 2016.”

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