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22 Jan 2015
Mario launches soverign QE - HSBC
FXStreet (Guatemala) - Analysts at HSBC noted that the ECB will buy EUR60bn of assets a month until at least September 2016, ahead of market expectations.
Key Quotes:
"We are cutting our year-end 2015 EUR/USD target to 1.09 from 1.15."
"In fixed income, we think this will support the trend of eurozone curve
flattening and lower Treasury yields".
"Mario Draghi, announced that it would make EUR60bn a month of total asset purchases, starting in March. It has so far bought EUR13bn a month of asset-backed securities and covered bonds, so broadening the programme implies it will buy just under EUR50bn a month of bonds issued by eurozone governments, agencies and European institutions in the secondary market against central bank money."
"The programme will last at least until September 2016 but, reassuringly, is basically open-ended if inflation has not risen close to 2% by then. Most of the risk - 80% - will lie with national central banks. The maturities of bonds purchased will range from two to 30 years including inflation-linked debt (but so far excluding corporate bonds)."
"The ECB's aggressive stance is likely to generate additional EUR weakness. We believe Japan's experience provides the best parallel for understanding the future path of the EUR. We therefore expect the EUR, already justifiably lower on the announcement effect, to fall further this year with EUR/USD reaching a revised 1.09 by the end of 2015 compared to our previous forecast of 1.15."
"Overall our view is that this will further support the trend of eurozone curve flattening, trigger flows into US Treasuries from those non-eurozone institutions that sell to the ECB and because of the cheapness of inflation-linked bonds, we would expect better performance of these assets."
Key Quotes:
"We are cutting our year-end 2015 EUR/USD target to 1.09 from 1.15."
"In fixed income, we think this will support the trend of eurozone curve
flattening and lower Treasury yields".
"Mario Draghi, announced that it would make EUR60bn a month of total asset purchases, starting in March. It has so far bought EUR13bn a month of asset-backed securities and covered bonds, so broadening the programme implies it will buy just under EUR50bn a month of bonds issued by eurozone governments, agencies and European institutions in the secondary market against central bank money."
"The programme will last at least until September 2016 but, reassuringly, is basically open-ended if inflation has not risen close to 2% by then. Most of the risk - 80% - will lie with national central banks. The maturities of bonds purchased will range from two to 30 years including inflation-linked debt (but so far excluding corporate bonds)."
"The ECB's aggressive stance is likely to generate additional EUR weakness. We believe Japan's experience provides the best parallel for understanding the future path of the EUR. We therefore expect the EUR, already justifiably lower on the announcement effect, to fall further this year with EUR/USD reaching a revised 1.09 by the end of 2015 compared to our previous forecast of 1.15."
"Overall our view is that this will further support the trend of eurozone curve flattening, trigger flows into US Treasuries from those non-eurozone institutions that sell to the ECB and because of the cheapness of inflation-linked bonds, we would expect better performance of these assets."