歐洲-投資策略-定向長期再融資操作的正反面

1、Sources:ECBBNPParibasG10INTERESTRATESProsconsofanewTLTROOfthetotalEUR3.25trnliquidityprovidedtothemarketbytheECBmethan20%(aboutEUR740bn)isprovidedviaitsSecondTargetedLongTermRepoOperation(TLTROII).Almostalloftherestcomes

2、fromtheQEprogramme.ItispossiblethatalargechunkofthefirstTLTROIItranche–whichisEUR385bninsize–willberepaidinJune2019becauseatthatpointitsremainingmaturitywilltobelowoneyearwhichreducesitsvaluetobanksasasourceoffundingfrom

3、aregulaty(StableFundingRatio)pointofview.EvenifnotmuchisrepaidinJunethesharptransitionofsuchalargeamountoffundingfromtheaboveoneyeartothebelowoneyearNSFRbucketmaycausesomestrainwithinthebankingsysteminfundingmarketsespec

4、iallyifsomebanksrelyonTLTROfundingfNSFRneeds.SoalthoughliquidityissettoremainampleafterJune(evenifthefirstTLTROIItranchewererepaidinfull)theECBisprobablyconsideringhowtoprotectthesystemfrompotentialdisruptionasTLTROIIage

5、sfromeithertotalliquiditybankspecificsources.OneoptionwouldbeftheECBtointroducesomekindofnewlongtermfundingfacility.Butweseeseveraldisadvantageswiththis.TheECBhassometimeinhsowedonotexpectanyannouncementinthisregardatits

6、Decembermeeting.Fig.1:ECBexcessliquidityFig.2:LTROtakeupbycountry3000EURbnPotentialpathsofexcessliquidity3%8%ItaFecastaveragepath2500ExcessliquidityRiskscenario2000OMOQE1500Requiredreserves3%4%33%SpaFra100050005001000150

7、0Autonomousfacts12%15%22%GerhBelAusOthersSources:ECBBNPParibas(TLTROsaccountf98%ofLTROs)CamilledeCourcel|SeniInterestRateStrategist|LaurenceMutkinGlobalHeadofG10RatesStrategy|LuigiSperanzaHeadofEuropeanEconomics|BNPParib

8、asLondonBranch|FOCUS071120181PleaserefertoimptantinfmationattheendofthisreptFOCUS|EUROZONE07November2018KEYMESSAGESAlargetrancheoftheTLTROIImayberepaidinJune2019.Evenifnotthetransitionofthistranchefromabovetobelowoneyear

9、fundingcouldcausestrainsinthebankingsystemfundingmarkets.TotalsystemliquiditywillremainampleafterJune.TheECBisprobablyconsideringhowtoprotectthesystemfrompossibleadverseeffectsoftheagingoftheTLTRO.AnewTLTROispossiblebuth

10、assubstantialdisadvantages.WedonotexpecttheECBtomakeanannouncementaboutthisatitsDecembermeeting.200720082009201020112012201320142015201620172018201920202021ERESTRATESProsconsofanewtermfundingfacilityHowshouldtheECBprepar

11、efJune2019AlthoughtotalliquidityissettoremainampleafterJuneduetotheaccumulatedeffectofQEtheTLTROII(evenifthefirstTLTROIItranchewererepaidinfull)weexpecttheECBisconsideringmeasurestoprotectthesystemagainstpotentialdisrupt

12、ionasTLTROIIagesfromeither:?alargeintotalfinancingduetoasuddenlargerepaymentofpartofthefirsttrancheinJune?asuddenneedfincreasedASFfsomebanksifheavilyreliantonthefirstTLTROIItranchetomeettheirNSFRrequirement.Oneoptionwoul

13、dbeftheECBtolaunchsomekindofnewlongtermfundingfacility.Butsuchamovehasdrawbacksaswellasadvantages.TheProsofanewtermfundingfacility:Theintroductionofanewtermfundingfacilitywould:?avoidacliffedgeintermsoftotalliquidity?may

14、helpsomebanksmaintaintheirNSFRs?offsetthe‘hawkish’messageinherentintheendingofassetpurchases(balancesheetexpansion)?thuscounterbalancesomeoftherecentnegativenewsongrowth.Theintroductionofthisfacilitymightalsoreleasesomeo

15、fthemarketstressaroundItalyasItalianbanksarecollectivelythelargestusersofTLTROIIfundingwithapproximatelyEUR175bn(some25%)oftotalTLTROIIbalances.theCons:?ReintroducingTLTROcanbeseenasachangeinstance.InMarch2018whentheECBs

16、tillkeptthefwardguidancementioningpotentially“l(fā)owerinterestrates”MarioDraghiemphaticallystated:“ThesecondissueonwhichIwouldliketodrawyourattentionisasyouknowtheTLTROsaregoingtoexpire.Therewasnodiscussionabouthavinganothe

17、rTLTROnotatall”.ThiswasthefirststepofthenmalisationprocessthreemonthslaterattheJunemeetingtheECBremovedthereferenceto“l(fā)ower”fromitsfwardguidance.?Confusingthemessage.Whyendassetpurchasesifthereisaneedtoaddexcessliquidity

18、throughanewLTROInthepastfexampleinthedebateonchangingthesequencingtheECBhasbeenatpainstoavoidsendingcontradictysignalswithitsvariousmoarypolicytools.?AfmoffwardguidanceWhiletechnicallyanewTLTROwouldnotbeinconsistentwithh

19、igherratesitwouldlikelybeinterpretedasadovishsignalleadingmarketstoflattenthetrajectyofrateexpectations.?Theriskofalowtakeup–whatifanewprogrammefloppediftakeupwerelimitedtoItaliantosaysomeSpanishbanksitmightbepolitically

20、controversialseenasameasuretosupptItaly.TakeupriskdependsofcourseontheconditionsoftheTLTRO.Butfavourableconditionssuchasalongfixedratewouldincreasethesignallingeffectproblem.?TotheextentthatLTROshavebeenaneffectiveeasing

21、toolgiventhedifficultiesofreturningtoQEtheECBshouldarguablykeepanynewLTROinreservetouseiftheeconomicoutlookweretodeteriatemeaningfully.Designwouldbekey.TheECBislikelyconsideringhowtopreventanydisruptionastheTLTROIIages:a

22、newtermfundingfacilityisanobviouspossibility.Butsuchafacilityisalsoamoarytoolwhichcanbedeployedifthemacrooutlookshoulddeteriate(perhapsifmarkettensionsonItalyescalatewithspillovereffectstoothercountries).Withoutcarefulco

23、mmunicationmarketsmaystruggletodifferentiatethetwo.Thetermsofanynewfacility–maturityinterestraterepaymentflexibility–wouldbeimptantincreatinganeffectivefacilitywhilesendingtherightsignals.Fexamplealongermaturityfacilityw

24、itha(low)fixedratewouldbeseenasmedovishthanashtertermfacilityreferencingtheDepositrateasafloatingfundingrate.TheECBhassometimeinh.TheECBhasafewmonthsstillbefethethreatofalargerepaymentinJuneaffectsmarkets.What’smeannounc

25、inganewfinancingfacilityatthesametimethatitisendingbalancesheetexpansion(assetpurchases)wouldgiveaconflictingsignalabouttheECB’smoarypolicystance.SowedonotexpectanyannouncementattheDecemberECBmeeting.RatherweexpectPresid

26、entDraghitokeeptheoptionopenwithcommentsinlinewiththosemadeinOctoberthat:“theTLTROwasraisedbytwospeakersonlybutnotinanydetailbutthisisjustanexampleofhowthetoolboxisstillquiterichintermsofmoarypolicyinstruments”.Thisgives

27、themarketsreassurancethattheECBhasanaceupitssleeveintheeventofashockwhetheritcomesfromliquiditymarketsthemacroeconomicoutlookelsewhere.CamilledeCourcel|SeniInterestRateStrategist|LaurenceMutkinGlobalHeadofG10RatesStrateg