13 Feb 2015
Doubts arising on ECB’s QE – ING
FXStreet (Edinburgh) - Analyst at ING Bank Peter Vanden Houte assessed he capacity of the European Central Bank to purchase the already announced amount of bonds under the ‘quantitative easing’ programme.
Key Quotes
“As the ECB’s QE programme is indeed meant to raise inflationary expectations, it should lead to some steepening of the yield curve”.
“However, for the time being the market is wondering whether the ECB will actually be capable of buying the amounts it announced”.
“As a matter of fact, with credit demand still relatively subdued (although we should be past the low point in the cycle) and ample liquidity, banks will be wary of selling their bonds”.
“Bond yields might therefore continue to stay around current levels until the middle of the year. Only when stronger evidence of a recovery and higher inflation expectations start to filter through, the long end of the curve is likely to see a sell-off”.
“That said, it might still take a year before the German 10yr bond yield tops 1% again”.
Key Quotes
“As the ECB’s QE programme is indeed meant to raise inflationary expectations, it should lead to some steepening of the yield curve”.
“However, for the time being the market is wondering whether the ECB will actually be capable of buying the amounts it announced”.
“As a matter of fact, with credit demand still relatively subdued (although we should be past the low point in the cycle) and ample liquidity, banks will be wary of selling their bonds”.
“Bond yields might therefore continue to stay around current levels until the middle of the year. Only when stronger evidence of a recovery and higher inflation expectations start to filter through, the long end of the curve is likely to see a sell-off”.
“That said, it might still take a year before the German 10yr bond yield tops 1% again”.