{"id":966,"date":"2012-04-05T14:00:00","date_gmt":"2012-04-05T14:00:00","guid":{"rendered":"http:\/\/starthostunlimiteddmffassi-ss.stackstaging.com\/bondworld.ch\/home\/sites\/20b\/7\/760c69a11c\/public_html\/investmentworld.ch\/index.php\/2012\/04\/05\/viewpoint-rien-ne-vas-plus-at-least-for-some-time-to-come\/"},"modified":"2012-04-05T14:00:00","modified_gmt":"2012-04-05T14:00:00","slug":"viewpoint-rien-ne-vas-plus-at-least-for-some-time-to-come","status":"publish","type":"post","link":"https:\/\/www.investmentworld.eu\/ch\/viewpoint-rien-ne-vas-plus-at-least-for-some-time-to-come\/","title":{"rendered":"Viewpoint: Rien ne vas plus, at least for some time to come!"},"content":{"rendered":"

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ECB: Rien ne vas plus, at least for some time to come! The April ECB meeting left rates unchanged, with no news on the unconventional measures, and a broadly unchanged rhetoric.,…. <\/strong><\/div>\n

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

Draghi confirmed that it is still premature to start a debate on an exit strategy, as the ECB is still assessing the effects of the 36-month LOTRs, and both inflation expectations and the slack in the economy are stable. <\/p>\n

We continue to believe the ECB will not announce further 36-month LTROs, but full-allotment will be maintained at least until the beginning of 2013. The overall picture remains fragile, and it is premature to talk about any exit strategy. Draghi reasserted that the LTROs were designed to give euro area banks the time to recapitalise in an orderly manner, and governments the possibility of taking advantage of a relatively quiet phase on the financial markets to advance the fiscal consolidation process.<\/p>\n

The LTROs have generated a \u201ctimed increase in money base\u201d, aimed at guaranteeing unlimited liquidity to the system, although Draghi noted that the operations do not, and cannot, replace the process of recapitalising the balance sheets of banks, and even less so of governments. Draghi indicated that it is not possible to set an exact date to draw conclusions on the effects of the LTROs. In order to verify the effects of the LRTOs on the system, the ECB looks at national consolidated balances sheets every day, to verify to what extent the rise in liquidity translates into an increase in deposits, loans and\/or reserves with the ECB. Draghi stressed that it is still too early to assess the impact of the operations on the credit trend.<\/p>\n

Constraints on the supply of credit, and on fund flows on the interbank market are due to 1) lack of funding sources at acceptable costs (the ECB has managed this issue); 2) lack of capital (a problem the ECB cannot resolve); 3) the perception of risk tied to concerns that counterparties are not sufficiently liquid (a risk factor to which the ECB has indirectly contributed) and\/or solvent, due to lack of capital, an issue to solve which the ECB is almost powerless; 4) lack of demand, which the ECB can support, as it is doing, with exceptionally low rates. As regards concerns tied to collateral, the ECB is comfortable with the new rules, and this indicates that there is no rush to return to an ordinary regime.<\/p>\n

Draghi reasserted that already in March the risks tied to new loans were mitigated by the hefty haircut applied (53% on average, but as large as 75% in some cases). As regards the ECB\u2019s decision of 21\/3\/2012, based on which national central banks are not obliged to accept as collateral bank bonds guaranteed by sovereign states that have applied for financial assistance from the IMF and the EU Commission, this simply indicates that the risk tied to this type of asset should not necessarily be extended to other countries. However, Draghi clarified that the decision will have limited effects in practical terms. As regards Greek banks, Draghi said that the EUR 25Bn in funds issued as part of the second bailout package should guarantee access for institutions to OMOs in the short term, and banks will also be able to continue to refinance themselves through the ELA. We stick with our view that interest rates will stay put for an extended period of time. The ECB has confirmed the signs of a stabilisation of activity on modest levels, and downside risks to the growth scenario in line with the assessment made a month ago. Risks to the inflation trend are skewed to the upside in the short term, in light of persistently strong pressures from the energy component; however, in the medium term the ECB expects the inflation trend to stay in line with the price stability target. The ECB is checking the pass-through of energy prices to the distribution chain, and in particular to the prices of domestic goods, but this does not mean that the ECB has not adopted sterner tones on risks to the inflation trend. Also, the ECB reasserted that the price stability target must be pursued for the euro area as a whole, and that individual countries are responsible for guaranteeing the competitiveness of domestic economies by adopting an appropriate mix of policies.<\/p>\n

While divergences are physiological, Draghi specified that a targeted inflation rate of close to, but below, 2%, should be reached not through an increase in inflation in virtuous countries, as opposed to deflation in less virtuous countries, but gradual convergence towards an inflation rate of close to 2% in all countries.<\/p>\n

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Appendix
<\/strong> <\/p>\n

Analyst Certification<\/strong>
The financial analysts who prepared this report, and whose names and roles appear on the first page, certify that: (1) The views expressed on companies mentioned herein accurately reflect independent, fair and balanced personal views; (2) No direct or indirect compensation has been or will be received in exchange for any views expressed. Specific disclosures: The analysts who prepared this report do not receive bonuses, salaries, or any other form of compensation that is based upon specific investment banking transactions.<\/p>\n

Important Disclosures<\/strong>
This research has been prepared by Intesa Sanpaolo S.p.A. and distributed by Banca IMI S.p.A. Milan, Banca IMI SpA-London Branch (a member of the London Stock Exchange) and Banca IMI Securities Corp (a member of the NYSE and NASD). Intesa Sanpaolo S.p.A. accepts full responsibility for the contents of this report. Please also note that Intesa Sanpaolo S.p.A. reserves the right to issue this document to its own clients. Banca IMI S.p.A. and Intesa Sanpaolo S.p.A. are both part of the Gruppo Intesa Sanpaolo. Intesa Sanpaolo S.p.A. and Banca IMI S.p.A. are both authorised by the Banca d’Italia, are both regulated by the Financial Services Authority in the conduct of designated investment business in the UK and by the SEC for the conduct of US business.
Opinions and estimates in this research are as at the date of this material and are subject to change without notice to the recipient. Information and opinions have been obtained from sources believed to be reliable, but no representation or warranty is made as to their accuracy or correctness. Past performance is not a guarantee of future results. The investments and strategies discussed in this research may not be suitable for all investors. If you are in any doubt you should consult your investment advisor.
This report has been prepared solely for information purposes and is not intended as an offer or solicitation with respect to the purchase or sale of any financial products. It should not be regarded as a substitute for the exercise of the recipient\u2019s own judgement.
No Intesa Sanpaolo S.p.A. or Banca IMI S.p.A. entities accept any liability whatsoever for any direct, consequential or indirect loss arising from any use of material contained in this report.
This document may only be reproduced or published together with the name of Intesa Sanpaolo S.p.A. and Banca IMI S.p.A.. Intesa Sanpaolo S.p.A. and Banca IMI S.p.A. have in place a Joint Conflicts Management Policy for managing effectively the conflicts of interest which might affect the impartiality of all investment research which is held out, or where it is reasonable for the user to rely on the research, as being an impartial assessment of the value or prospects of its subject matter. A copy of this Policy is available to the recipient of this research upon making a written request to the Compliance Officer, Intesa Sanpaolo S.p.A., 90 Queen Street, London EC4N 1SA.
Intesa Sanpaolo S.p.A. has formalised a set of principles and procedures for dealing with conflicts of interest (\u201cResearch Policy\u201d). The Research Policy is clearly explained in the relevant section of Banca IMI\u2019s web site (www.bancaimi.com).
Member companies of the Intesa Sanpaolo Group, or their directors and\/or representatives and\/or employees and\/or members of their households, may have a long or short position in any securities mentioned at any time, and may make a purchase and\/or sale, or offer to make a purchase and\/or sale, of any of the securities from time to time in the open market or otherwise. Intesa Sanpaolo S.p.A. issues and circulates research to Qualified Institutional Investors in the USA only through Banca IMI Securities Corp., 245 Park Avenue, 35th floor, 10167 New York, NY,USA, Tel: (1) 212 326 1230. Residents in Italy: This document is intended for distribution only to professional investors as defined in art.31, Consob Regulation no. 11522 of 1.07.1998 either as a printed document and\/or in electronic form. Person and residents in the UK: This document is not for distribution in the United Kingdom to persons who would be defined as private customers under rules of the FSA.
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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.

Coverage Policy And Frequency Of Research Reports<\/strong>
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<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"

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