Commentaren op de aankondiging van de ECB

Commentaren op de aankondiging van de ECB

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Hieronder volgende commentaren van diverse partijen op de aankondiging van de ECB:

Gilles Moec, Group Chief Economist at AXA Investment Managers, comments on yesterday’s ECB announcement:

It is a very good package, at last.

The ECB’s limits are still nominally there but they no longer bite. That’s the welcome main takeaway from last night’s announcements.

Beyond the impressive overall new figure for QE (EUR 750bn until the end of 2020, with the possibility to do more), the key is that on the “limits” the “Council will consider revising them to the extent necessary”. The capital key will remain the “benchmark” of the purchases but they will be conducted “in a flexible manner” across jurisdictions and between public and private assets. So in reality those limits are now probably mere “reference values”.

They have added corporate commercial paper to the list of purchasable assets which is important given the pressure on this market, while on the macro point of view it is key to a number of crucial European corporates which don’t need this additional concern at the moment.

The Euro has caught up with the US. Both legs of economic policy, monetary and fiscal, are now providing massive support. The depth of the economic short term shock still depends on how the epidemic itself is handled, but at least there is now a convincing policy apparatus to deal with the second round effects which could hamper the rebound.

The result is good.

Commentaar Paul Markham (Newton IM, onderdeel van BNY Mellon IM) op noodpakket ECB

Onderstaand het commentaar van Paul Markham, global equities portfolio manager bij Newton Investment Management (onderdeel van BNY Mellon Investment Management) op het Pandemic Emergency Purchase Programme van de ECB.

‘In an extraordinary late-night meeting, the ECB has surprised markets with a sudden emergency €750bn debt-purchase package - it’s certainly a big number and has helped to calm investors for the time being. Having said that, it may not be the last monetary stimulus the ECB and central banks have to put in place, but it’s certainly a positive step for now.

Looking back at the European debt crisis in 2011 and the financial crash of 2008 there are now similar concerns for the European Central Bank when it comes to debt and, in particular in the near term, liquidity. This purchasing programme might go some way in helping the ECB to calm European bond markets and build confidence, which will prove crucial especially when it comes to countries such as Italy which has seen its government bond yields and debt servicing costs face upward pressure.’

Nordea Asset Management: The ECB takes a significant step

Sébastien Galy, Sr. Macro Strategist at Nordea Asset Management, comments on the significant step taken by the ECB:

The ECB issued a new impressive 750bn QE program to deal with the Covid-19 virus. The key elements are that it follows the APP (asset purchase programs) and that it is ambivalently stated regarding the key ratio before maturity in that it seems a tad tougher than the previous program, though importantly Greek bonds are part of the program. Credit easing happens with Commercial Paper and the acceptance of financial claims to the corporate sector as collateral. This is the beginning of dealing with small and mini caps as it will require a risk sharing framework with banks they need to negotiate. Importantly, the ECB will consider revising its limits.

After riskmanagement led to bloodshed in the sovereign bond market and faced with the size of the shock, this response is far more adequate than the previous decision. Indeed, in an institution now prizing consensus, one shouldn’t be surprised that it is more reactive.

This news is very well received in the Greek and Italian bond markets. The stabilization and then drifting lower of yields should help the exposed banks but even before this, the simple drop in volatility should help a lot as it drives riskmanagement. The problem is whether credit risk is absorbed sufficiently, in other words, whether it falls to the neediest in those countries without the fiscal balance to absorb the shock. Hard hit Italy is in a worse position compared to Greece until they change the nature of the program.

The program itself is a gigantic prop for core Europe to help it move through the hole in revenue that has started to gap and is likely to take down some small companies. The stats are that most new companies fail in the first 5 years because of liquidity issues (Banque de France).

The reaction of the EURUSD was that this was a non-event: the same is not be the case in the bond market as it was driven by risk reduction and extreme balance sheet usage. The race now is for the first ones to liberate enough balance sheet to run these carry trades in the periphery. Greek bonds have already appreciated sharply. For this they need a sense that the Covid-19 virus is being contained in Italy, Greece and the rest of Europe to convince their riskmanager. A point of extreme convexity is therefore ahead of us - whisper a tad too much and the entire equilibrium will brutally shift until we can safely forecast peak acceleration in the virus.

The ECB’s move particularly in its details is very impressive and as other central banks it will eventually move to a risk-sharing framework for small and minicaps. When it does, it will bode very well indeed for Greece and Italy. Banks will be aware of these discussions so that the moves should pre-empt the decision as a way to help finance banks. We welcome the ECB’s decision and its consideration for Greece and a hard hit Italy.