hereward the wake
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Jessi_trader
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from what I have learn in last 5 years, I can say QE is always good for market.... lets print more money....
Jessi_trader
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long dow 17609
Jessi_trader
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not touching DAX today
hereward the wake
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Drinkies time let me see.... Rattler tonight I think
SuddenDeath
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SuddenDeath
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Jessi_trader
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closed @ 17677 for +68 points :clap:
scholfield
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11k dax looking likely soon
it's only natural, all biology :smart:
Dentalfloss
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So Draghi and Co finally deliver on QE, though the details are quite complex, and have been fashioned not only to compromise on issues such as risk sharing, but also drawing on some of the pitfalls of the BoE and Fed programmes.
Key points
- Govt bond and supranational QE will be combined with the existing Covered Bond and ABS programmes at a pace of EUR 60 Bln per month as of March 2015 and for the time being to run until September 2016, and contingent on there being a "sustained adjustment" in the path of CPI towards thE ECB's target of 2.0% - thus giving the ECB plenty of flexibility in terms of when this programme is brought to an end, and tying it very explicitly to inflation. But let us assume it runs to September 2016, the total then including TLTROs, ABS and CBP would be just ca EUR 1.05 Bln, though it is unclear how much of this would be Govt Bond QE. But again assuming that the ABS & CBP purchases continued at their current pace they would amount to 300-350 Bln, so the Govt portion would be EUR 700-750 Bln, slightly above the consensus prior to the meeting, and certainly significant in overall volume terms. Purchases of govt bonds will be made according to the ECB's capital key as expected, and the 10 bps TLTRO premium was eliminated. Rather more surprising was the very broad 2-30 yr maturity spectrum and include inflation-linked debt.
So much for the positives, on the negative side:
- Risk sharing is very limited, with national central banks taking 80% of the risk on sovereign bond purchases, and rather un-reassuring was Draghi's comment that "most national central banks have adequate buffers to absorb a negative event" - most being how many.
- Not good news for Greece, while it and Cyprus will be eligible for purchases of govt under a 'waiver' for (bail-out) 'programme countries', the ECB already has a very high volume of Greek bonds on it balance sheet from the SMP programme, and given a limit on total holdings for each sovereign issuer, it will not be eligible for purchases until it redeems debt in July asnd August. It should be added that other Italy and Spain and other bail-out countries will implicitly also have a lower available volume of total purchases, until SMP holdings are redeemed.
- BUT perhaps the key aspect relates to the limits on the 25% limit on purchases of a single issue, which ensures that the ECB adheres to the ECJ's ruling about the ECB ensuring that is does not interfere with "price formation". So here's the key aspect, there are some $12.0 Trln of FX reserves in the world, of which roughly a quarter are held in Euros. Operating on the traditional metric that roughly half of those will be invested in Govt Bills and Bonds, this means that FX reserve managers will have to be involved in the process of establishing prices for whatever is purchased under the Govt bond QE programme. Eminently anything that is sold by central banks will not find its way into the private financial sector, therefore that EUR 60 Bln figure may often overstate what is being injected into the market.
Last but not least, the expanded programme does not start until March 15, so "Mr Market" now has a very long waiting period to sit on holdings of EUR debt before selling to the ECB, and with plenty of event risk in the world, starting with the Greek election, and to mention the prospect of an imminent Ukrainian default. Sort this under an uncomfortably long period before the QE 'party' gets started.
from Marc Ostwald
Key points
- Govt bond and supranational QE will be combined with the existing Covered Bond and ABS programmes at a pace of EUR 60 Bln per month as of March 2015 and for the time being to run until September 2016, and contingent on there being a "sustained adjustment" in the path of CPI towards thE ECB's target of 2.0% - thus giving the ECB plenty of flexibility in terms of when this programme is brought to an end, and tying it very explicitly to inflation. But let us assume it runs to September 2016, the total then including TLTROs, ABS and CBP would be just ca EUR 1.05 Bln, though it is unclear how much of this would be Govt Bond QE. But again assuming that the ABS & CBP purchases continued at their current pace they would amount to 300-350 Bln, so the Govt portion would be EUR 700-750 Bln, slightly above the consensus prior to the meeting, and certainly significant in overall volume terms. Purchases of govt bonds will be made according to the ECB's capital key as expected, and the 10 bps TLTRO premium was eliminated. Rather more surprising was the very broad 2-30 yr maturity spectrum and include inflation-linked debt.
So much for the positives, on the negative side:
- Risk sharing is very limited, with national central banks taking 80% of the risk on sovereign bond purchases, and rather un-reassuring was Draghi's comment that "most national central banks have adequate buffers to absorb a negative event" - most being how many.
- Not good news for Greece, while it and Cyprus will be eligible for purchases of govt under a 'waiver' for (bail-out) 'programme countries', the ECB already has a very high volume of Greek bonds on it balance sheet from the SMP programme, and given a limit on total holdings for each sovereign issuer, it will not be eligible for purchases until it redeems debt in July asnd August. It should be added that other Italy and Spain and other bail-out countries will implicitly also have a lower available volume of total purchases, until SMP holdings are redeemed.
- BUT perhaps the key aspect relates to the limits on the 25% limit on purchases of a single issue, which ensures that the ECB adheres to the ECJ's ruling about the ECB ensuring that is does not interfere with "price formation". So here's the key aspect, there are some $12.0 Trln of FX reserves in the world, of which roughly a quarter are held in Euros. Operating on the traditional metric that roughly half of those will be invested in Govt Bills and Bonds, this means that FX reserve managers will have to be involved in the process of establishing prices for whatever is purchased under the Govt bond QE programme. Eminently anything that is sold by central banks will not find its way into the private financial sector, therefore that EUR 60 Bln figure may often overstate what is being injected into the market.
Last but not least, the expanded programme does not start until March 15, so "Mr Market" now has a very long waiting period to sit on holdings of EUR debt before selling to the ECB, and with plenty of event risk in the world, starting with the Greek election, and to mention the prospect of an imminent Ukrainian default. Sort this under an uncomfortably long period before the QE 'party' gets started.
from Marc Ostwald
Dentalfloss
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lets see if we can take out that trend res
