Wednesday, May 16, 2018

QE plan how does it work part I

QE plan: how does it work? part I

Bloomberg columnists are wondering how it will operate the European program of quantitative easing.
"The puzzle Mario
Draghi 1 trillion euros is not the key pieces
composition. When ECB president January 22
finally announced a buyout program
monthly buying European assets
control the amount of EUR 60 billion for
warning of deflation, investors
It was at least surprised by the announced
amount.


Later, when
It received more information, analytics,
examines in detail the ECB's statements,
They find that several remain unclear
critical points.


"Absent
fine print - one that should
have a real impact on the start-up
plan ", - he says, for example, Johannes
Gareis, economist at the Frankfurt company
Natixis.


We list here
Several important points of the plan of
quantitative easing, which
representatives of the regulator is not considered
necessary to explain.


Of
which will be repurchased assets?



monthly
ECB expenses will include, first,
existing purchase program
protected and backed bonds
asset-backed securities. Of what is
added to this program, Mario Draghi
I mentioned 12% of debt securities issued
agencies and institutional
EU participants, and the rest will
government bonds.


how many
ECB provides to spend for each
asset type?


The president
The ECB said that the regulator will buy
bonds with a payment period of 2 - 30 years
without determining the average target which could
would affect the yield curves and expenses
Borrowing. At the same time the central bank
It states that the IOUs are
and include debt instruments with
floating rate and securities
negative return, but does not
a clear idea of ​​each fraction
such as redeemable assets in the final
portfolio.


to what extent
transparent will purchase securities?


No one
of the ECB is not particularly spread of
mechanics of QE. when they were
bought sovereign debt securities
from 2010 to 2012, according to the currently
It is no longer active on the markets program
securities, these acts were committed
on the market without prior announcement.


This strategy
contrasts with the Fed's calendar which
it released before the QE and
which clearly painted, when will
perfect ransom and what documents will be
It includes.


promulgated
Calendar "would guarantee full
transparency and minimizes the distortion
market ", - says Ricardo Hermitt,
chief economist at Mizuho
International Plc.


to what extent
complete and timely information is
transactions?


The ECB said that
transaction "will be released in weekly
reports, listing the assets. " This
scheme is already in place for the purchase of
insured bonds and ABS.


for sovereign
debt securities and bonds purchased
under QE, will be published
monthly report with conducted
amounts.


ECB
is going to determine the amount of limits,
spent on this or that paper?


regulator
It plans to support a maximum of 33% of the debt
any country and at least 25% of the bonds
any specific issue. Dont clear,
how it will be measured. For example,
whether short-term treasury
A bill is part of the unpaid
the country's debt?


ECB react
to Greece?


treasury
promissory notes are particularly important for Greece, where
The ECB and the central banks of the euro area
owned government securities
paper about Euro 27 billion (40%
unpaid debt of Greece, except
treasury bills, but only 33% if
Short-term debt is still included in the
calculation).


It all depends on
how to behave in the newly elected
the new Greek government. Prime Minister
Alexis Tsipras won power on the basis of
promises of restructuring the national
debt and reform to bring
the country's economy to pre-crisis level.
Yesterday in Paris the Minister of Finance,
Yanis Varoufakis, said that his country
no longer going to take international
financial assistance in accordance with
current anti-crisis agreement and
He hinted that it would be necessary to sign a new
agreement. At the same time, new
the government does not want to be away from
feeders Eurozone Tsipras going
go to Frankfurt and talk to
ECB officials about restructuring
debt."

Alessandro Speciale and David Goodman, exclusively for Bloomberg. Translation - Lesnik007



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