Pernille Bomholdt Henneberg, Senior Analyst at Danske Bank, said that according to the minutes of the latest European Central Bank meeting, the bank is not about to introduce new QE buying distribution.
“In the ECB Minutes from the meeting in mid-January, the ECB concluded that on capital key purchases distribution ‘limited and temporary deviations were possible and inevitable’. The immediate market reaction was tighter French and Italian spreads versus Germany, reflecting speculation at the ECB following an outstanding debt key distribution, which would strongly benefit France and Italy but result in less purchases of German bonds.”
“In our view, it is highly unlikely that the ECB would follow an outstanding debt key distribution, as it would thereby support countries that do not have sound fiscal policies.”
“The ECB Minutes also confirmed the previous signal that the ECB has a desire to buy bonds yielding above the deposit rate. According to the Minutes, ‘there was some room for a trade-off between relative deviations from the capital key across jurisdictions and limiting the extent of purchases below the deposit facility rate’.”