{"id":1420,"date":"2014-06-27T12:00:00","date_gmt":"2014-06-27T12:00:00","guid":{"rendered":"http:\/\/starthostunlimiteddmffassi-ss.stackstaging.com\/bondworld.ch\/home\/sites\/20b\/7\/760c69a11c\/public_html\/investmentworld.ch\/index.php\/2014\/06\/27\/viewpoint-it-seems-early-days-yet-for-an-announcement-on-abss\/"},"modified":"2014-06-27T12:00:00","modified_gmt":"2014-06-27T12:00:00","slug":"viewpoint-it-seems-early-days-yet-for-an-announcement-on-abss","status":"publish","type":"post","link":"https:\/\/www.investmentworld.eu\/ch\/viewpoint-it-seems-early-days-yet-for-an-announcement-on-abss\/","title":{"rendered":"Viewpoint: It seems early days yet for an announcement on ABSs"},"content":{"rendered":"

The ECB\u2019s July meeting should be a technical one, during which the operational details of the four-year TLTRO series will be refined and announced, ahead of the first operation in September….<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n

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For professional investors and advisers only<\/strong><\/p>\n

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Press conference tones are likely to remain very accommodative, in the attempt to keep money market expectations and the exchange rate well under control.
– The ECB Governing Council\u2019s June meeting brought the announcement of a package of monetary policy measures; the definition of some of them, however, has been postponed to subsequent communications. The July meeting could fill this gap in part.
– The most important measure to be defined is the launching of Targeted Long-Term Refinancing Operations (TLTROs), which should reap effects on the monetary policy transmission mechanism. These operations may have a positive impact on the average cost of funding for some credit institutions, opening up guaranteed and low-cost access to mediumterm liquidity sources. The success of TLTROs in stimulating lending to the non-financial private sector (loans to enterprises and households, excluding mortgages), however, will depend not only on the availability of funding at low costs, but also on credit demand conditions, on the capital solidity of banks, and on the assessment of borrower risk. From this point of view, TLTROs will not remove any capital constraints on banks, nor will they boost
demand for credit which, it should be stressed, is sluggish due to still uncertain macroeconomic prospects. It is hard to assess the potential impact of TLTROs on new loans volumes, as well as on rates applied to customers, also because the ECB still has to disclose the operational details of how the refinancing operations will be implemented. First of all, we expect the ECB to specify, in July, how it will calculate the benchmark compared to which the actual increase in customer loans will be assessed. In its June statement, the ECB indicated that loans growth at the time of application for funding from the ECB would have to be in excess, by a specified benchmark, of the average loans issued by each bank in the 12 months up to 30 April 2014. Secondly, the ECB may introduce mechanisms to make sure that the funds are channelled to new lending to small and medium enterprises (and not only to large corporations, which already enjoy more favourable conditions and direct access to the market). Lastly, it will be interesting to see whether there will clear obligations to transfer the cost savings to end customers. The ECB is very likely to exercise strong moral suasionon banks to take out funds and transfer the savings on funding costs to customer rates. However, it should be considered that the impact of such savings on the rates applied to customers is unlikely to be very significant. With the first two operations, banks will be able to draw at most 400 billion euros, i.e. 7% of total outstanding loans to non-financial firms and nonmortgage loans to households (5,307 billion euros), and the reduction in the average cost of funding will be diluted as a result. The impact could be more significant for operations to be held between March 2015and June 2016 (when banks could take out loans equal to up to three times the value of outstanding loans at the time of the operation, on condition of the loans having grown by a percentage to be defined compared to the average over the previous 12 months up to 30 April 2014), if cost savings were channelled to new loans.
– On the other hand, it seems early days yet for an announcement on ABSs, other than the initiatives already taken on the regulatory and guideline fronts to support the recovery of the market.
– As regards the other June measures, the negative deposit rate at -0.10% helped reduce to zero the positive carry on the money market curve in euros, and to ease pressures on the exchange rate. Extension of full allotment until July 2016 is an important decision, as it fixes a broader time horizon for the period of low rates.The message is that rates will stay lower and for much longer in the United States and in the United Kingdom, where in all likeliness they will start to rise by 2015. Lastly, by abolishing sterilisation of the effects of the SMP, a small signal has been sent, pointing in the direction ofquantitative stimulus. It remains to be seen whether this will be enough to stop a sell-off of area curves in the presence of a US rate hike.
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Appendix
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Important Disclosures<\/strong>
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Valuation Methodology<\/strong>
Trading Ideas are based on the market\u2019s expectations, investors\u2019 positioning and technical, quantitative or qualitative aspects. They take into account the key macro and market events and to what extent they have already been discounted in yields and\/or market spreads. They are also based on events which are expected to affect the market trend in terms of yields and\/or spreads in the short-medium term. The Trading Ideas may refer to both cash and derivative instruments and indicate a precise target or yield range or a yield spread between different market curves or different maturities on the same curve. The relative valuations may be in terms of yield, asset swap spreads or benchmark spreads.

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Intesa Sanpaolo S.p.A. trading ideas are made in both a very short time horizon (the current day or subsequent days) or in a horizon ranging from one week to three months, in conjunction with any exceptional event that affects the issuer\u2019s operations. In the case of a short note, we advise investors to refer to the most recent report published by Intesa Sanpaolo S.p.A\u2019s Research Department for a full analysis of valuation methodology, earnings assumptions and risks. Research is available on IMI\u2019s web site (www.bancaimi.com) or by contacting your sales representative.<\/p>\n

Source: BONDWorld – Intesa Sanpaolo \u2013 Research Department<\/p>\n","protected":false},"excerpt":{"rendered":"

The ECB\u2019s July meeting should be a technical one, during which the operational details of the four-year TLTRO series will be refined and announced, ahead of the first operation in September….<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"telegram_tosend":false,"telegram_tosend_message":"","telegram_tosend_target":0,"footnotes":"","_wpscp_schedule_draft_date":"","_wpscp_schedule_republish_date":"","_wpscppro_advance_schedule":false,"_wpscppro_advance_schedule_date":"","_wpscppro_dont_share_socialmedia":false,"_wpscppro_custom_social_share_image":0,"_facebook_share_type":"","_twitter_share_type":"","_linkedin_share_type":"","_pinterest_share_type":"","_linkedin_share_type_page":"","_instagram_share_type":"","_medium_share_type":"","_threads_share_type":"","_google_business_share_type":"","_selected_social_profile":[],"_wpsp_enable_custom_social_template":false,"_wpsp_social_scheduling":{"enabled":false,"datetime":null,"platforms":[],"status":"template_only","dateOption":"today","timeOption":"now","customDays":"","customHours":"","customDate":"","customTime":"","schedulingType":"absolute"},"_wpsp_active_default_template":true},"categories":[50],"tags":[],"class_list":["post-1420","post","type-post","status-publish","format-standard","hentry","category-weekly-analysis"],"blocksy_meta":{"styles_descriptor":{"styles":{"desktop":"","tablet":"","mobile":""},"google_fonts":[],"version":6}},"_links":{"self":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/posts\/1420","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/comments?post=1420"}],"version-history":[{"count":0,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/posts\/1420\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/media?parent=1420"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/categories?post=1420"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/tags?post=1420"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}