Trading with point and figure

ftse updated
in trend supp

10dbjlw.gif
 
Quick comment - a) this does not preclude taper, b) Issue limit and yield floor changes much easier to get council agreement than capital key, c) still contingent on forecasts, d) plenty more of these sort of stories to come, particularly once US election hurdle is over, e) Friday CPI data (France, Spain, Germany) important, above all signals on core CPI, f) Eurozone/G7 bond markets looking like very tired today, should really be getting more of a boost from oil price fall, issuance overhang (above all corps weighing)? - EIA inventories 15.30 London next hurdle. Marc

ECB all but certain to keep buying bonds beyond March, ease QE rules - central bank sources - Reuters News
26-Oct-2016 14:48:06

* Purchases likely to continue beyond March
* Amount will depend on economic data
* Rules to be eased to source enough paper
* Capital key, issue limit and yield floor under scrutiny

FRANKFURT, Oct 26 (Reuters) - The European Central Bank is
nearly certain to continue buying bonds beyond its March target
and to relax its constraints on the purchases to ensure it finds
enough paper to buy, central bank sources have told Reuters.
The moves will come in an attempt to bolster what is being
heralded as the start of an economic recovery in the euro zone.
ECB policymakers are due to decide in December on the future
shape and duration of their 80 billion euros ($87.36 billion)
monthly quantitative easing (QE) scheme, based on new growth and
inflation forecasts.
They did not discuss specific options at last week's meeting
and no policy proposal has been formulated. But sources familiar
with the matter said it was all but sure that money printing
would continue in some form beyond March, currently the ECB's
earliest end-date.
This would be consistent with ECB President Mario Draghi's
guidance last week that the Bank would keep a "very substantial
degree of monetary accommodation" and his dismissal of an abrupt
end to the bond scheme.
The ECB declined to comment for this article.
Whether the current monthly volume of purchases will be
maintained or reduced after March has not been decided and will
depend on incoming economic data, the sources said.
Recent data has shown a slight uptick in inflation and other
gauges of economic activity, suggesting a nascent recovery.
Business activity in the euro zone expanded this month at
the fastest pace this year while the Ifo indicator of German
business confidence improved unexpectedly in
October
But with price growth still seen missing the ECB's target of
almost 2 percent for at least two years, not even the most
hawkish members of the ECB's Governing Council are prepared to
argue bond purchases should stop in March, the sources said.

LOOSENING RULES
The extension means some of the ECB's self-imposed
constraints on what it can buy will have to be eased as eligible
German bonds become harder to find, the sources
Said
One possible change being considered would see the ECB
buying fewer bonds from countries where scarcity is starting to
emerge, such as Germany, whose government debt up to five years
is often ineligible because it yields less than the deposit
rate.
This would be a small departure from a rule dictating that
sovereign bonds be bought in proportion to the amount of capital
each country has paid into the ECB, which depends on the size of
its economy.
While ditching this 'capital key' altogether would invite
political and even legal accusations that the ECB is financing
governments, a small deviation is now seen as acceptable and
well within the scope of a recent court ruling on ECB money
printing, the sources said.
They noted the ECB is already deviating from the key, for
example by buying fewer Portuguese and Estonian bonds than the
rule dictates in recent months. Germany has typically enjoyed
slightly oversized purchases as a result of that. [nL8N1BH38D]
Another way to get around a dearth of German paper would be
the relax a 'yield floor' rule barring the ECB from buying debt
that yields less than its -0.40 percent deposit rate.
This option would be favoured by the more hawkish ECB rate
setters but the economic benefits of further depressing already
negative yields are unclear.
The ECB is also considering buying more than a third of any
individual bond issue, except for a few which have a specific
restructuring proviso known as a collective action clause (CAC).
"It could come to a combination of measures and it will be a
difficult decision," one of the central bank sources said.
ECB rate setters have so far been tight lipped in public,
although growing acknowledgment by the ECB's most senior
officials of the negative impact of negative interest rates on
financial firms' profits suggest a further rate reduction is not
likely.
Money markets no longer price in a 10 basis point cut in the
ECB's deposit rate, currently at minus 0.40 percent, by
year-end.
That contrasts sharply with June, when the market priced in
an 80 percent chance of a cut as Britain's shock decision to
quit the European Union fuelled concerns about the outlook for
growth and inflation.

________________________________
ADM Investor Services International Litd
Marc Ostwald
 
bang on with dow 18050 and 18083
ftse 6916
dax fooled us...a bit 10640...slightly lower than we thought....went well in the end
 
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