According to an ECB-leaked spreadsheet (now confirmed) [5], the impotent omnipotent central bank bought a mere EUR1.7 billion of covered bonds last week (which was largely expected) according to Bloomberg [6]. This somewhat inglorious start to the ECB's efforts to engorge its balance by another trillion or so is supported by precedent as it has been the sovereign purchase programs that made the big difference in the past. Under pressure to "front-load the purchases" as one analyst notes, the results from last week suggest, as we have warned, there simply is not enough quality unencumbered assets lying around in Europe to make a dent in the ECB's efforts to greatly rotate taxpayer-backed free money on to bank balance sheets.
- *ECB SAYS EU1.7 BLN OF COVERED-BOND PURCHASES SETTLED LAST WEEK
[7]
The ECB’s two previous rounds of covered-bond buying started slowly and gradually increased in size. That’s in contrast to the larger acquisitions of government securities made under its now-defunct Securities Market Program, which topped out in the first week of each round.
[8]
Another component of the new stimulus plan, the buying of asset-backed securities, will also commence this quarter as the ECB seeks to fend off deflation by boosting the amount of money available for banks to lend to households and businesses.
“Given the economic situation, the ECB needs to do something and there will be pressure to buy in big amounts and front-load the purchases,” said Ruben van Leeuwen, an analyst at Rabobank in Utrecht, the Netherlands. “At the beginning it’s easier to perform well, but later it will be hard to buy bonds as there will be less around and the market will be less liquid.”
* * *
It seems at just EUR 1.7bn, it was neither easy nor liquid to give the ECB money away.
