Back
23 Jan 2015
ECB summed up - Westpac
FXStreet (Guatemala) - Sean Callow, analyst at Westpac Banking Corporation ABN explained that his colleague Richard in New York summarizes the ECB announcement.
Key Quotes:
"Starting in March the ECB will purchase EUR60bn in public and private assets per month until at least September 2016."
"That amounts to EUR1.08trn in asset purchases, though that includes covered bonds and ABS. The latter since mid-Oct have averaged EUR10bn per month, meaning we can guess that sovereign purchases will amount to around EUR50bn per month, or EUR900bn through to September 2016. Sep 2016 may not prove to be a firm end date either. There is an open-ended feature with Draghi noting that purchases will be, “carried out until end-September 2016 and will in any case be conducted until we see a sustained adjustment in the path of inflation”.
"Purchases may well thus extend beyond Sep 2016."
"The ECB will coordinate with purchases to be spread among the national central banks, 20% of any losses will be shared by all member states. Specifically, 12% of new purchases will be subject to loss sharing and the ECB will hold another 8% of the bonds purchased. The limited sharing of risks will be clearly read as a compromise to Germany. The ECB has also set itself a constraint - they will not buy more than 25% of any bond on issue and no more than 33% of any nation’s outstanding bonds. The maturity spectrum of purchases runs from 2 to 30 years."
Key Quotes:
"Starting in March the ECB will purchase EUR60bn in public and private assets per month until at least September 2016."
"That amounts to EUR1.08trn in asset purchases, though that includes covered bonds and ABS. The latter since mid-Oct have averaged EUR10bn per month, meaning we can guess that sovereign purchases will amount to around EUR50bn per month, or EUR900bn through to September 2016. Sep 2016 may not prove to be a firm end date either. There is an open-ended feature with Draghi noting that purchases will be, “carried out until end-September 2016 and will in any case be conducted until we see a sustained adjustment in the path of inflation”.
"Purchases may well thus extend beyond Sep 2016."
"The ECB will coordinate with purchases to be spread among the national central banks, 20% of any losses will be shared by all member states. Specifically, 12% of new purchases will be subject to loss sharing and the ECB will hold another 8% of the bonds purchased. The limited sharing of risks will be clearly read as a compromise to Germany. The ECB has also set itself a constraint - they will not buy more than 25% of any bond on issue and no more than 33% of any nation’s outstanding bonds. The maturity spectrum of purchases runs from 2 to 30 years."