11 December 2014

Reuters: Banks take barely more than half of cheap ECB funds on offer

Banks borrowed barely more than half of the total money that had been offered this year as the euro zone's economy continues to struggle.

The 129.8 billion euros borrowed is almost exactly what traders polled by Reuters had predicted. It brings the total take-up to 212.4 billion euros, far short of the 400 billion that had been on offer in total this year.

Full article on Reuters

Reuters: Crunch loan offer may hold key to next ECB policy move

Banks are not expected to take up all the long-term European Central Bank loans offered December 11, increasing pressure on the ECB to begin buying sovereign bonds to hit a self-imposed stimulus target.

The ECB is offering banks the cheap, four-year loans as part of a package of measures to add around 1 trillion euros to its balance sheet - a goal it has set with a view to pumping money into the economy to save it from deflation.

At 0.3 percent, inflation is far below the ECB's target of just under 2 percent. Furthermore, a downgrade of Italy's sovereign debt rating last week and market jitters about Greece highlight the risk of the euro zone crisis flaring up again.

A big injection of cash with the so-called targeted long-term refinancing operation (TLTRO) would help the ECB on its way to achieving its 1 trillion-euro balance sheet target, but markets expect just the opposite.

A Reuters poll of money market traders on Monday pointed to banks taking 130 billion euros ($161.10 billion) December 11. They borrowed 82.6 billion in a first tranche in September and can take up to 400 billion in both rounds combined.

"A low take-up (December 11) clearly strengthens the rationale to adopt a broad-based asset-purchase programme, or QE," said Andrew Bosomworth, a senior portfolio manager at Pimco in Munich.

Full article on Reuters

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