Once again today we see spurious ECB members sending more mixed messages about ECB actions in the near future (and really only impacting precious metals by the look of it. Having said just a month ago that ECB QE would only be undertaken in strict adherence with mandates and treaties, and warning that QE would strain the ECB's risk-bearing ability; today Luxembourger announced that ABS QE would start next week and Sovereign QE is an option if things get worse. One bank, at least, will be overjoyed... as ABN AMRO wrote this morning that that the ECB needs to bid more aggressively for covered bonds to encourage the street to sell to them.
Mersche a month ago...
- *MERSCH SAYS QE ONLY IN STRICT ADHERENCE WITH ECB MANDATE
- *MERSCH: QE WOULD STRAIN RISK-BEARING ABILITY OF BALANCE SHEET
And today, his memory seems short...
- *MERSCH SAYS ABS PURCHASES WILL START IN A WEEK
- *MERSCH SAYS SOVEREIGN QE OPTION IF SITUATION DETERIORATES
- *MERSCH SAYS GOVERNMENT-BOND PURCHASES ARE OPTION IF NEEDED
- *MERSCH SAYS MONETARY POLICY CAN ONLY BUY TIME FOR REFORMS
- *MERSCH SAYS ECB HAS EXHAUSTED ROOM TO CUT INTEREST RATES
And today, as Bloomberg reportsm, ABN demands the ECB pay up...
ECB needs to bid for covered bonds more aggressively in order to continue to buy significant amounts in secondary market, Joost Beaumont, analyst at ABN AMRO, writes in client note.
Estimates suggest ECB bought just EU400m/day of covered bonds on secondary market last week vs EU600m daily avg in first two weeks of program.
Slowdown in secondary activity reflects scarce availability of paper due to negative net supply and difficulty in convincing investors to sell bonds
EU7.4b of purchases exceeds ABN’s initial expectations
If central bank becomes more aggressive, impact on spreads likely to become more pronounced
ECB may need to cut EU1t balance sheet expansion target, Credit Suisse analysts said earlier
* * *
Roughly translated is: "we front-ran your program based on entirely non-economic rationales and now it's "fuck you, pay me" time."
Unintended consequence #34527, "whatever it takes" means buying everything at the worst possible prices and forcing EU taxpayers to carry that over-paying risk.
