Börse Express – OTS: Börsen-Zeitung / The ECB interest rate control, market commentary by Kai Johannsen

The ECB interest rate control, market commentary by Kai Johannsen

Frankfurt (ots) – The European Central Bank (ECB) has at its council meeting on

Thursday in terms of fighting the crisis a lot more. The bond purchases in

Under the Pandemic Emergency Purchase Program (PEPP) were around 500 billion euros

to 1.85 trillion Euro expanded. The purchases are expected by at least March 2022

to be continued, after it was previously planned for mid-2021. Some

Market participants initially reacted disappointed, because sometimes even more

expected. ECB chief Christine Lagarde stated that the program would not

would have to be fully exploited. But just in case it could

be increased. That keeps the speculation alive in the market that

possibly refilled.

But what it was all about were the announcements from Lagarde, and these

will be far-reaching for the markets. “Lagarde’s repeated emphasis on that

The main objective of the ECB is’ to obtain favorable financing conditions

receive ‘, where one’ will buy flexibly according to market conditions’ comes

very close to an explicit interest rate curve control, which the ECB under the EU Treaty

should not exercise “, says Christoph Rieger, who at Commerzbank the interest

and directs credit research. The PEPP becomes PFFC (preserve favorable

financing conditions).

ECB absorbs everything

As for the actual numbers, the average would be monthly

Purchase rate for PEPP and APP (Asset Purchase Program) together until March 2022

92 billion euros. That corresponds to the pace at which the ECB has been since August

is on the way. “It would still be enough to roughly cover the entire

To absorb net supply of eurozone government bonds, which we for next

Expect year “, said Rieger. And that is ultimately a not entirely insignificant one

Volume when you consider that the states are fighting the pandemic and the

economic impairments enormous effort in matters

Have to deal with refinancing.

The ECB never tires of stressing that interest rates will continue to be cut

could. Lagarde explicitly underlined the forward guidance, according to which the ECB should issue the

Sees interest rates ‘at their current or lower levels’. Since rate cuts

are more likely than interest rate hikes in at least the next three years,

The front end of the yield curve should be well anchored and the curve above that

Stay inverted. “The ECB does with its yield curve control

Seriously, and even the slightly lower monthly purchases mean they do

arguably the entire net supply of eurozone government bonds in the next year

will absorb “, says Rieger.

And what does that mean for the markets? For the eurozone government bond market are

the prospects as clear as day. One should increase yields for the time of the PEPP

better not expect. Because it is precisely the declared aim to raise interest rates in the

Fight against the economic misery and keep it low

Funding conditions for institutions. That means states continue to do so

Can take out low interest credit. In many countries the

Yield structure curve are in the red over wide maturity ranges. Both

in most countries this is already in the maturity band of two to ten years

Case. Portugal recently joined this group. On Friday

Spain’s ten-year rate became negative for the first time. The hunt for the investors

Returns will go on. The crowding-out of investors is what the

Investors are pushing for even longer terms or in poorer credit ratings with the

Result that in these segments (maturities and ratings) the

Bond yields continue to go down, a process that has been going on for years

is watching.

And what does it mean for Europe’s stocks? The central bank put is again

got bigger, and it has been in the past few years. in the

Result put the shares due to this initiated by the central banks

The flood of liquidity increases significantly. You should be prepared for the

Performance of the shares will therefore also be quite good in 2021. Thanks to the ECB. It

However, there remains an uncertainty factor, and this is called defaults.

Insolvency registrations are postponed in many places. But it can

don’t go on like this forever, at some point a company has to declare whether it is now

may or may not survive. And then it remains to be seen to what extent

economic disaster assumes. There will be one or the other from

Course slips are disappearing and certainly not with enormous price gains.

Press contact:

Stock exchanges newspaper

editorial staff

Phone: 069–2732-0

www.boersen-zeitung.de

Further material: http://presseportal.de/pm/30377/4789161

OTS: Börsen-Zeitung

AXC0398 2020-12-11 / 20: 27

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