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ECB Releases Q&A And Terms And Conditions Of Europe's (First) Quantitative €asing

Tyler Durden's picture




 

Alongside the Draghi presser, the ECB moments ago the terms and conditions of its Q€, or as the ECB calls it, the "public sector purchase programme (PSPP)" Here are the full details and the Q&A.

* * *

From the ECB:

Implementation aspects of the public sector purchase programme (PSPP)

In the context of the Eurosystem's expanded asset purchase programme announced on 22 January 2015, which consists of combined monthly purchases of EUR 60 bn in public and private sector securities, purchases under the public sector purchase programme (PSPP) of marketable debt instruments issued by euro area central governments, certain agencies located in the euro area or certain international or supranational institutions (referred to in legal texts as "international organisations and multilateral development banks") located in the euro area will start on 9 March 2015 (for more information, see also the Q&A on the public sector purchase programme).
Implementation

In its implementation of the PSPP, the Eurosystem intends to conduct purchases in a gradual and broad-based manner, aiming to achieve market neutrality in order to avoid interfering with the market price formation mechanism.

In principle, purchases of nominal marketable debt instruments at a negative yield to maturity are permissible as long as the yield is above the deposit facility rate.

If the purchasable volume of marketable debt instruments issued by the central government and agencies is insufficient in the respective jurisdiction to accommodate the corresponding share of purchases under the ECB's capital key, substitute purchases are foreseen.

If these substitute purchases comprise marketable debt instruments issued by international or supranational institutions located in the euro area, such purchases will be subsumed under the 12% allocation for these securities in the PSPP. The remaining purchases of marketable debt instruments issued by international or supranational institutions located in the euro area will be conducted on behalf of the Eurosystem by the Banco de España and the Banque de France.
International and supranational institutions and agencies

The initial list of international or supranational institutions located in the euro area and of agencies located in the euro area whose securities are eligible for the PSPP is as follows:
International or supranational institutions located in the euro area

  • Council of Europe Development Bank
  • European Atomic Energy Community
  • European Financial Stability Facility
  • European Stability Mechanism
  • European Investment Bank
  • European Union
  • Nordic Investment Bank

Agencies located in the euro area

  • Caisse d'amortissement de la dette sociale (CADES)
  • Union Nationale Interprofessionnelle pour l'Emploi dans l'Industrie et le Commerce (UNEDIC)
  • Instituto de Credito Oficial
  • Kreditanstalt fuer Wiederaufbau
  • Landeskreditbank Baden-Württemberg Foerderbank
  • Landwirtschaftliche Rentenbank
  • NRW.Bank

This initial list may be amended following the Governing Council meeting on 15 April 2015 on the basis of monetary policy considerations and duly reflecting risk management issues.
Securities lending

The marketable debt instruments purchased under the PSPP will be made available for securities lending. This will be implemented in a decentralised manner, mirroring the organisation of the PSPP.

The Eurosystem will start to gradually lend securities using the channels for securities lending available under its existing infrastructure, including so-called fails mitigation programmes by international central securities depositories, agency lending and bilateral securities lending. The Eurosystem aims to develop these existing formats in the near future.

* * *

And the Q&A:

Q&A on the public sector purchase programme (PSPP)

Will the Governing Council decide each month on the exact composition of the asset purchases to be made and instruct the national central banks (NCBs) to carry out these purchases, or will the NCBs have a degree of flexibility?

The Eurosystem will follow an internal benchmark when coordinating its purchases, with some flexibility for the NCBs to purchase their shares within the universe of eligible instruments. The need for flexibility and the leeway granted to NCBs will be assessed by the Governing Council, which may adjust the implementation framework in this regard on the basis of the experience gained.

How strictly will the capital key rule be followed? Could the Bundesbank, for instance, buy more agency securities and fewer Bunds for a while?

The share of purchases in an NCB's home market is determined by the ECB's capital key, with NCBs focusing exclusively on their home market. Within this home market, there will be some flexibility for the NCBs to choose between purchases of central government securities and securities of certain agencies established in the respective jurisdiction.

When the programme was announced, the ECB said that the purchases would be divided between countries on the basis of the ECB's capital key. Will the weightings need to be applied on a monthly basis, with each NCB buying the proportionate amount each month, or do these shares refer to the programme as a whole?

The ECB's capital key will guide purchases on a monthly basis. However, this does not imply that a precise achievement of capital key shares will be strictly targeted every month, as some flexibility on a monthly basis will support the smooth implementation of the programme.

How can the ECB purchase 33% of an issuer's outstanding securities if it is allowed to buy only 25% of each issue? Do the 25% and 33% limits include bonds purchased under the Securities Markets Programme and under the Eurosystem's own (i.e. non-monetary policy) portfolios? Regarding the issuer limit, is the denominator the whole debt or just the debt with a maturity of 2 to 30 years?

An issue share limit of 25% needed to be applied in order to avoid obtaining a blocking minority in the event of a debt restructuring involving collective action clauses. This issue limit thus also covers existing Eurosystem holdings of sovereign bonds in the context of the Securities Markets Programme (under which the 25% issue share limit was not applied at the time of purchase) and any other portfolios owned by Eurosystem central banks.

Likewise, the issuer limit of 33% is a means to safeguard market functioning and price formation as well as to mitigate the risk of the ECB becoming a dominant creditor of euro area governments. To this end, the 33% limit is applied to the universe of eligible assets in the 2 to 30-year range of residual maturity. The 33% issuer limit applies to the combined holdings of bonds under all purchase programmes.

Are the issue and issuer limits based on nominal or market value?

These limits will be based on nominal values.

What is meant by "other counterparties used by the Eurosystem for the investment of its euro-denominated portfolios"?

The purchases will be conducted by the ECB and the NCBs with their existing counterparties, including counterparties they trade with in the context of their own investment activities in euro-denominated securities. The portfolio managers of the ECB and the NCBs will be in bilateral contact with their eligible counterparties before purchases begin.

How will you coordinate the purchases between the NCBs? Will all NCBs purchase supranational bonds or will only the NCB of the country in which these supranational institutions are located conduct those purchases?

The ECB will coordinate all asset purchases within the Eurosystem. The ECB will not purchase debt securities issued by certain international or supranational institutions located in the euro area. Under a specialisation approach, only a few NCBs will buy securities issued by European supranational institutions, but this specialisation will be independent of the domicile of these international or supranational institutions.

Will the Eurosystem be able to buy in the primary market? Will a distinction be made, in terms of primary market purchases, between government and supranational bonds?

There will be no primary market purchases under the PSPP, regardless of the type of security, as such purchases are not allowed under Article 123 of the Treaty on the Functioning of the European Union.

How will you weigh different maturity buckets for your purchases?

The intention is to be market-neutral. The Eurosystem wants to create as little distortion as possible. At the same time, this will not be a strict target and flexibility will be applied, also taking into account the relative values of bonds and the liquidity of the different maturity segments.

What is the duration of purchases and how will duration be weighted?

There is no duration target for the programme.

How will you decide on the maturity breakdown of the purchases? By current outstanding amounts or by new issuance?

Purchases will in principle be weighted by nominal outstanding amounts, with eligible remaining maturities at the time of purchase ranging from 2 to 30 years, also taking into account the issue and issuer limits as well as potential distortions in certain maturity buckets.

What exactly does the 2 to 30-year maturity restriction mean?

The maturity restriction means that the Eurosystem will only buy securities which, at the time of purchase, have a minimum remaining maturity of 2 years (i.e. purchases of securities with a remaining maturity of 1 year and 364 days are NOT possible) and a maximum remaining maturity of less than 31 years (i.e. purchases of securities with a remaining maturity of 30 years and 364 days are possible).

* * *

But the simplest summary all of the above:

 

And this:

 

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Thu, 03/05/2015 - 10:46 | 5857367 Self-enslavement
Self-enslavement's picture

Criminals. Weimar Republic all over again. Then the parasites will all scream "holocaust" when they are arrested and sentenced for their crimes.

Thu, 03/05/2015 - 10:49 | 5857377 Newsboy
Newsboy's picture

We'll start sloooow, and make it up as we go.

It's gonna' be REEEL GOOD.

You're gonna' LOVE it.

OK, here we go...

Thu, 03/05/2015 - 10:53 | 5857388 Manthong
Manthong's picture

Instead of ZIRP or NIRP,  I favor ZBBRP (pronounced “Ziburp").

It stands for “Zero Banker Breathing Rate Policy”.

 

Thu, 03/05/2015 - 11:07 | 5857438 y3maxx
y3maxx's picture

...HERPES....."Heavy Euro Repurchase of Preferred Equities and Stuff"

Thu, 03/05/2015 - 11:19 | 5857482 TBT or not TBT
TBT or not TBT's picture

Awesome

Thu, 03/05/2015 - 11:49 | 5857590 Manthong
Manthong's picture

CLAP

Crappy Loser Asset Purchases

Thu, 03/05/2015 - 12:06 | 5857646 Self-enslavement
Self-enslavement's picture

IZHCCO

InsaneZioHyperCounterfeitingCriminalOrganization

Thu, 03/05/2015 - 12:53 | 5857830 knukles
knukles's picture

Panic time is real.  What is it the CB's know that they're so afeared of?
This is way past the point of a "currency war".  That's small peanuts compared to this.

Thu, 03/05/2015 - 11:13 | 5857459 Dapper Dan
Dapper Dan's picture

The FDIC has taken a big hit last friday

 

Failed Bank Information Information for Doral Bank, San Juan, PR

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $748.9 million. Compared to other alternatives, Banco Popular's acquisition was the least costly resolution for the FDIC's DIF. Doral Bank is the fourth FDIC-insured institution to fail this year, and the first in Puerto Rico. The last time an FDIC-insured institution was closed in Puerto Rico was on April 30, 2010.

https://www.fdic.gov/bank/individual/failed/doral.html

 

Doral was deemed by regulators as “critically under-capitalized,” unable to raise more capital after the FDIC told the bank last year that it couldn’t use a $229 million tax refund as part of its Tier 1 capital, reported Bloomberg.

On Friday, the FDIC accidentally released the information of the bank’s shutdown before the stock markets closed in New York. Doral shares sunk 46% before trading was halted.

http://ww2.cfo.com/credit/2015/03/doral-bank/

Thu, 03/05/2015 - 11:17 | 5857480 TBT or not TBT
TBT or not TBT's picture

in short they are going to buy up massive amounts of debt issued by an alphabet soup of prozi internationalism infested anti-market financial organizations.

and if you werent fully convinced yet that europe is boned, and this doesn't convince you, you may not be ready to understand articles posted on financial blogs.  You can enjoy the pictures though.   

Thu, 03/05/2015 - 11:07 | 5857432 Eeyores Enigma
Eeyores Enigma's picture

Condition #1 - In order to prevent runaway inflation 99% of all new money will go to 1%, only to those who have too much already and don't really need any more. (got that from the Fed)

Thu, 03/05/2015 - 10:45 | 5857368 dimwitted economist
dimwitted economist's picture

Fuck it.. just print that shit up Bitches!

Thu, 03/05/2015 - 10:45 | 5857370 Seasmoke
Seasmoke's picture

Helicopters

Thu, 03/05/2015 - 10:59 | 5857417 Billy Sol Estes
Billy Sol Estes's picture

Gyrocopters

Thu, 03/05/2015 - 19:32 | 5859316 jonytk
jonytk's picture

Drones

Thu, 03/05/2015 - 10:51 | 5857379 mastersnark
mastersnark's picture

Oh, I didn't realize the economic problem is folks are struggling to find buyers for their securities. Well, this should help out immensely.

Thu, 03/05/2015 - 10:53 | 5857391 RealityCheque
RealityCheque's picture

Well thats a really long way to say "we are clueless cunts, buy stocks!"

Thu, 03/05/2015 - 10:57 | 5857404 redbird
redbird's picture

"— Rudolf E. Havenstein (@RudyHavenstein)"   << Classic.

http://en.wikipedia.org/wiki/Rudolf_Havenstein

 

Thu, 03/05/2015 - 10:57 | 5857408 buzzsaw99
buzzsaw99's picture

you gotta be shitting me with some of those names

Thu, 03/05/2015 - 10:58 | 5857414 taketheredpill
taketheredpill's picture

 

PSPP...onomatopoeia for a fart

 

Thu, 03/05/2015 - 11:06 | 5857434 dirtyfiles
dirtyfiles's picture

in history books this chapter will be under one of the  biggest mistakes by the most "educated"

Thu, 03/05/2015 - 11:10 | 5857445 orkneylad
orkneylad's picture

Call me stupid, but isn't this just more air for the bubble?

Thu, 03/05/2015 - 11:10 | 5857446 Catalonia
Catalonia's picture

60bn is 180€ per eurozone inhabitant.

That means every working European will be forking out ~250€ a month directly to the banks.

Thu, 03/05/2015 - 11:26 | 5857488 Farqued Up
Farqued Up's picture

Now, my head hurts from that bubble blowing bloviating bovine scat. Can someone please try to KISS it for me, I'm a stupid simpleton.

But we all are ahead of Draghi, where did they find that hayseed, anyway?

Thu, 03/05/2015 - 15:23 | 5858433 blazinrabbit
blazinrabbit's picture

What I kept glancing at is the use of Public in the above article. Maybe its overuse is to repeat the lie that this program is in the interest of increased employment and a growing economy. Or maybe it's more brainwashing of the Anglo/American debt serfs that reminds us, the public, that we will be squeezed for everything of value for the transfer of wealth to the 0.01%. What is also interesting to me, is how open and shameless the bureau-rats have become in forcing this POS down our collective throats.

 

Thu, 03/05/2015 - 19:34 | 5859327 jonytk
jonytk's picture

Europeans govb debt to gdp was just reduced 33% and Bundesbank and other central banks in countries with negative bund yields will have to buy supranational institutions debt.

Thu, 03/05/2015 - 11:31 | 5857530 youngman
youngman's picture

I did not understand one thing but I think that is how they want it...

Thu, 03/05/2015 - 11:35 | 5857541 Racer
Racer's picture

PisSPeePeeing

 

Yes good term for it

Thu, 03/05/2015 - 11:40 | 5857551 Dead Canary
Dead Canary's picture

Yea. A new acronym is born.

 

PSPP

QE

OMT

MIC

KEY

MOU

SE

Thu, 03/05/2015 - 11:47 | 5857584 Racer
Racer's picture

to avoid interfering with the market price formation mechanism

 

LIARS!

Thu, 03/05/2015 - 12:10 | 5857665 Bananamerican
Bananamerican's picture

u cant say they aint got a sense of humor

Thu, 03/05/2015 - 11:54 | 5857607 yogibear
yogibear's picture

A Hank Paulson tanks in the street moment in the future.

Bailouts for any losses.

Thu, 03/05/2015 - 11:55 | 5857614 Billy Shears
Billy Shears's picture

I hope all people, on all continents, after the collapse, remember that it was the very same people who claimed to be saving us from a financial collapse that brought it to our front door. Hopefully, then they will know what to do.

Thu, 03/05/2015 - 14:09 | 5857623 nakki
nakki's picture

So since you can't repay the original loan, we'll give you another loan that can't be repaid. Then will give you a third loan, since you couldn't repay the first two loans. Then we'll monetize bad loans from banks that have bad loans on their books, because they loaned money to people and nations that can't pay those loans back. In the end all those insolvent nations and banks will all be made good, or we'lll just, oh fuck it!! We are Japan and there is no way any of these countries will ever be able to pay any loan back, but we must keep the delusion going, or else the best and brightest won't be able to buy Lamborghini's, and Bentley's.

Thu, 03/05/2015 - 12:07 | 5857651 Ghordius
Ghordius's picture

excellent Q&A. six mentions of "flexibility", several of "we'll see how it goes along", and a general "no, you are not going to get too much details"

Thu, 03/05/2015 - 12:45 | 5857730 Reptil
Reptil's picture

WHAT THE FUCK IS THE NUCLEAR INDUSTRY DOING IN THAT LIST? :-(
Are they ramming through an unprofitable, dangerous, untrustworthy industry "solution" this way?
Deciding the energy policy for the next 80 years through some Central planner ukaze?
Which is a POLITICAL DESCISION!?
Are we in a fucking Soviet Union planned disaster type nightmare, suddenly?

Meanwhile things are not going right in Fessenheim, a very "problematic" old nuke plant right on the border France/Germany
http://www.fessenheimstop.org/media/bildermaterial/28.02.2015%20Fessenhe...
Ruptured pipe they say.
http://energie.edf.com/nucleaire/carte-des-centrales-nucleaires/evenemen...

Thu, 03/05/2015 - 14:35 | 5858245 Niall Of The Ni...
Niall Of The Nine Hostages's picture

Simple. Weapons-grade plutonium doesn't make itself. And the banksters might need to refresh their supply of nukes soon.

Not for the Russians---for their own debt slaves.

Hitler gave the order in March 1945, when it was clear all was lost, to destroy everything in Germany that made industrial civilization possible there, to stop it from falling into Soviet hands, slow Soviet progress towards Berlin, and ultimately make Germany worthless as a Soviet colony. If Uncle Adolf couldn't rule Germany, he was determined that there wouldn't be a Germany worth anyone's trouble ruling.

Fortunately, Hitler didn't have the means to pull off his scorched-earth policy. Unfortunately, the banksters do.

When they give the order to apply their own "Nero Decree," it'll be carried out in a matter of hours, with everything of value in western Europe destroyed, the majority of Europe's debt slaves vaporized, and most of the rest condemned to die of hunger, radiation poisoning and other plagues long before Russian help arrives.

Of course, this will somehow be all Putin's fault. Or the Israelis'. They'll let us know which, I'm sure.

Thu, 03/05/2015 - 13:00 | 5857863 orangegeek
orangegeek's picture

MOAR FRAUD!!!

 

#FUCKYOUYELLEN

Thu, 03/05/2015 - 13:11 | 5857902 dearth vader
dearth vader's picture

You must be a gerontophiliac! Yakh.

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