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5 Jun 2014
Welcome to the negative deposit rate - Rabobank
FXStreet (Guatemala) - Analysts at Rabobank noted that the ECB cut its main refinancing and deposit rate by 10 basis points to 0.1% and -0.1% respectively, so for the first time taking the latter into negative territory.
Key Quotes:
“The marginal lending rate was reduced 35 basis points to 0.4, thereby restoring a symmetrical corridor”.
“In addition to these measures the ECB said it would extend its full allotment procedure until December 2016. Meanwhile, and perhaps to some surprise of the market, it decided to suspend the weekly SMP sterilization operations – a policy measure we have long identified as an effective way to reduce Eonia fixings, now that the level of excess liquidity in the money market has fallen”.
“However, the ECB would not be the ECB if it did not also treat the financial community with a new acronym: the TLTRO. In a nutshell, these are “targeted” (conditional) long-term refinancing operations aimed to increase lending to the non-financial private sector. Last but not least, the ECB said it would “intensify preparatory work related to outright purchases in the ABS market”.
“In short, this was more than the market had expected – certainly in terms of the amount of measures”.
“However, the devil's in the detail and we explain some of these measures in this research note. This is our first take”.
Key Quotes:
“The marginal lending rate was reduced 35 basis points to 0.4, thereby restoring a symmetrical corridor”.
“In addition to these measures the ECB said it would extend its full allotment procedure until December 2016. Meanwhile, and perhaps to some surprise of the market, it decided to suspend the weekly SMP sterilization operations – a policy measure we have long identified as an effective way to reduce Eonia fixings, now that the level of excess liquidity in the money market has fallen”.
“However, the ECB would not be the ECB if it did not also treat the financial community with a new acronym: the TLTRO. In a nutshell, these are “targeted” (conditional) long-term refinancing operations aimed to increase lending to the non-financial private sector. Last but not least, the ECB said it would “intensify preparatory work related to outright purchases in the ABS market”.
“In short, this was more than the market had expected – certainly in terms of the amount of measures”.
“However, the devil's in the detail and we explain some of these measures in this research note. This is our first take”.