(Boursier.com) – Ads from the European Central Bank, on Thursday afternoon, may well disappoint the expectations of investors. If the formalization of a quantitative easing at European – and its amount, which should amount to € 50 billion per month – no doubt, technical terms should not be identified, said Quilvest Management .
War exchange
The central banks are to maneuver and it is a real currency war in full swing. While investors expect a lot of monetary ECB meeting today, to officially launch the famous debt buyback program in the euro area, the Canadian central bank has arranged says the institution. “To everyone’s surprise, the Bank of Canada has lowered the target rate of overnight from 0.25% to 0.75%. This decision is justified by the recent fall in oil prices, which penalizes Canadian economy, producer of black gold, “says Ronan Blanc, bond manager at Quilvest Management.
But the oil impact is not the only reason …” The anticipation of the program shopping European asset has urged the Bank of Canada to monetary inflection. So far its cycle was rather close to that of the Fed and the trend was the gradual tightening of monetary conditions. This unexpected decision demonstrates that each economic zone wishes to maintain a certain level of competitiveness and seeks to hold the value of its currency, “observes the manager.
No balance sheet expansion of the central bank
Monetary ECB meeting should lead to a program of asset purchases of $ 50 billion a month until the end of 2016, totaling close to 1,000 billion. “A priori, this amount seems to live up to market expectations. But in reality, the pace of purchases is not enough to support a program that spans twenty months. Above all, the balance sheet of the ECB far from being in a situation of expansion, as could be hoped investors. Indeed, reimbursement operations LTRO launched three years ago dramatically bridle the balance sheet of the central bank. “
Moreover, there is little chance of seeing the institution disclose the technical details of its quantitative easing. “Nothing we say will be the allocation of the purchase and uncertainty about the eligible titles remain numerous. In Quilvest Management, we think everything will pan a bond voluntarily abandoned by the ECB. The central bank does not purchase securities including collective action clauses or bonds to negative rates (on the French yield curve is the case of securities with maturities greater than 4 years), “says Ronan Blanc.
In these conditions, the risk of disappointment is great for the financial markets. “Investors were probably too ambitious in their expectations. The ECB can not do everything and we had the example with ABS purchases, aimed at boosting the segment of securitized credit. Only 2 billion of these shares were purchased by the central bank, plus 33 billion covered bonds, against 150 billion expected purchases on these two asset classes! “concludes Ronan Blanc.
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