What the banks are thinking:

BaML: They expect the ECB to cut the Refi rate to 10bp and the Depo rate to -10bp, following further downside revisions to its inflation projections. Although they don't expect QE yet, if inflation fails to increase in the third quarter, the ECB could be forced in this direction to avoid a drop in medium-term inflation expectations.

Barclays: They expect the ECB to cut the Refi and Depo rates by 10bp and also extend the Fixed Rate Full Allotment from July 2015 to 2016. They also expect some form of support package to SMEs which could include targeted LTRO/FLS, SME/ABS purchase programme or direct lending to SMEs.

Citi: Negative deposit rates may have a stronger impact on EUR than currently anticipated by the market.

Commerz: They expect the ECB to lower all 3 policy rates by 15bp, taking the Depo rate to -0.15bp, which should be the most the ECB is willing to do given the unknown side effects some members keep stressing. As excess reserves held in current accounts are remunerated at zero, the ECB would then have to force banks to transfer holdings that are exceeding reserve requirements into the deposit facility or it could decide that excess reserves held in current accounts are
also remunerated at the depo rate instead of zero.

CSFB: They expect the ECB to cut the Refi and Depo rates by 10bp and think the areas of greatest potential surprise are in the size of a rate cut and in whether or not assets are removed from bank balance sheets as Draghi recently hinted.
Danske: They expect the ECB to cut the Refi and Depo rates by 10bp and also to boost liquidity with a new 3y LTRO.

GS: They expect the ECB to lower policy rates by 15bp and to announce targeted credit easing measures, probably in the form of a conditional vLTRO. However, they don’t expect QE. They expect updated staff projections to show further downward revisions to inflation.

HSBC: They expect the ECB to cut the Refi and Depo rates by 10bp, and also to announce an extension of fixed rate full allotment for another year to mid-2016. It could also announce a new LTRO linked to some kind of FLS, but the effectiveness would depend on how long it is and whether it is at a fixed rate, as well as the conditions attached (ie for lending to SMEs). The end of SMP sterilisation (to offset the impact of shrinking excess liquidity), and an announcement of the ECB’s intention to start publishing some kind of minutes of its meetings are also likely.

JPM: They expect the ECB to cut the Refi and Depo rates by 15bp, extend full allotment, SME ABS purchases and an FLS-style LTRO. On the LTRO, they believe the ECB will target credit creation more than liquidity/bank funding issues, while limiting the incentives for banks to implement only carry trades.

MS: They expect the ECB to lower all 3 policy rates by 15bp, although a few weeks ago, they hadn’t expected negative depo rates. They also speculate the ECB could lower the minimum reserve requirement or halt SMP sterilisation.

Nomura: They expect the ECB to lower all 3 policy rates by 10bp and think the ECB could disappoint expectations for more than a rate cut.

RBS: They expect the ECB to lower all 3 policy rates by 15bp and also to extend the fixed rate full allotment regime until at least mid-2016. There are also 3 additional courses of action: 1. a decision to terminate the SMP drain; 2. a decision to launch a new
LTRO with a fixed or capped rate that may have net lending conditions attached; 3. an announcement that the ECB intends to purchase high quality vanilla ABS of SME over an extended time horizon.

SocGen: They expect the ECB will deliver 4 sets of action at the June meeting: 1. rate cuts, including a negative deposit rate (-10bp); 2. liquidity injection (ending the sterilisation of the SMP); 3. targeted LTROs (FLS) and 4. a programme of non-government asset debt purchases, including ABS.

UBS: A negative deposit rate looks to be a done deal and shouldn’t be dismissed as ineffective, although at 10bp cut is mostly priced in. It would signal the ECB is willing to consider measures previously seen as taboo.

Quelle: www.itcmarkets.com

  

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