22 Jan 2015
ECB programme might aim to grow its balance sheet by EUR 1trn – SG
FXStreet (Barcelona) - Kit Juckes of Societe Generale views that the ECB QE programme will be consistent with the stated of aim of expanding the ECB’s balance sheet by EUR 1trn by allocating EUR 500bn+ in government bonds and around EUR 400bn in private sector assets.
Key Quotes
“I think it will be a lot easier for the ECB to 'please' asset markets, and a lot easier to further boost Frankfurt's booming real estate, than to get GDP growth, or inflation up. But the focus today is on markets, not the real world.”
“There will a lot of detail to absorb from the ECB meeting. It seems almost certain that sovereign bond purchases will be announced; likely that we will see at least €50bn per month for at least a year; possible that they extend it to cover long-dated debt. The more they buy, in terms of quantity, duration and in extending beyond Aaa to all investment grade (but probably not beyond), the better for risk sentiment.”
“Yesterday afternoon, newswires reported that the Executive Board proposed buying €50bn of bonds through 2016, prompting much debate about whether that meant one or two years' worth of purchases (ie, €600bn or over €1trn) and considerable volatility. So much for the idea that ECB action is priced in and it will all be a damp squib.”
“The press commentary this morning is that the initial proposal (to be debated by the ECB Council) is for €50bn per month for at least a year.”
“The SG view is that the programme will be consistent with the stated aim to grow the ECB's balance sheet by €1trn, and that will eventually require over €500bn in government bonds and €400bn in private sector assets through one programme or another.”
Key Quotes
“I think it will be a lot easier for the ECB to 'please' asset markets, and a lot easier to further boost Frankfurt's booming real estate, than to get GDP growth, or inflation up. But the focus today is on markets, not the real world.”
“There will a lot of detail to absorb from the ECB meeting. It seems almost certain that sovereign bond purchases will be announced; likely that we will see at least €50bn per month for at least a year; possible that they extend it to cover long-dated debt. The more they buy, in terms of quantity, duration and in extending beyond Aaa to all investment grade (but probably not beyond), the better for risk sentiment.”
“Yesterday afternoon, newswires reported that the Executive Board proposed buying €50bn of bonds through 2016, prompting much debate about whether that meant one or two years' worth of purchases (ie, €600bn or over €1trn) and considerable volatility. So much for the idea that ECB action is priced in and it will all be a damp squib.”
“The press commentary this morning is that the initial proposal (to be debated by the ECB Council) is for €50bn per month for at least a year.”
“The SG view is that the programme will be consistent with the stated aim to grow the ECB's balance sheet by €1trn, and that will eventually require over €500bn in government bonds and €400bn in private sector assets through one programme or another.”