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23 Jan 2015
Which SSA’s will the ECB and NCB’s purchase? - Rabobank
FXStreet (Barcelona) - The Research Team at Rabobank suggest which SSAs the ECB and National Central Bank’s are likely to purchase and give a guide as to how much of the EUR60bn p/month in purchases will concentrate on SSA debt.
Key Quotes
“First, the ECB’s current asset purchase plan constitutes what our ABS Analyst Ruben van Leeuwen suggests is around EUR10bn per month. This leaves us with EUR50bn in assets for potential purchase.”
“Given the ECB has stated that 12% of the additional asset purchases will be made up of European institutions, (these assets will be purchased by the NCB’s and will be subject to loss sharing), we anticipate the NCB’s will purchase some EUR6bn p/month of European institution (supranational) debt, which, over the course of the expected 19 month purchasing programme, equates to EUR114bn in supranational debt.”
“We anticipate the European institutions will include the European Investment Bank, the European Union, the International Bank for Reconstruction and Development, Council of Europe Development Bank and potentially Eurofirma. Each of these institutions are Aaa/AA+ rated and all of them already benefit from a form of cross-shareholder guarantee structure, suggesting that the 12% which will be risk shared in terms of hypothetical losses are not only very highly rated but already share risks across national borders already. This we view as a very ‘easy victory’ for the ECB.”
“In terms of the modalities, each country will buy an amount based on its share of the capital contribution key with the ECB. As an example, Germany’s contribution stands at 25.57%, which suggests the Bundesbank will be in the market for approximately EUR1.53bnbn of the 6bn each month.”
Key Quotes
“First, the ECB’s current asset purchase plan constitutes what our ABS Analyst Ruben van Leeuwen suggests is around EUR10bn per month. This leaves us with EUR50bn in assets for potential purchase.”
“Given the ECB has stated that 12% of the additional asset purchases will be made up of European institutions, (these assets will be purchased by the NCB’s and will be subject to loss sharing), we anticipate the NCB’s will purchase some EUR6bn p/month of European institution (supranational) debt, which, over the course of the expected 19 month purchasing programme, equates to EUR114bn in supranational debt.”
“We anticipate the European institutions will include the European Investment Bank, the European Union, the International Bank for Reconstruction and Development, Council of Europe Development Bank and potentially Eurofirma. Each of these institutions are Aaa/AA+ rated and all of them already benefit from a form of cross-shareholder guarantee structure, suggesting that the 12% which will be risk shared in terms of hypothetical losses are not only very highly rated but already share risks across national borders already. This we view as a very ‘easy victory’ for the ECB.”
“In terms of the modalities, each country will buy an amount based on its share of the capital contribution key with the ECB. As an example, Germany’s contribution stands at 25.57%, which suggests the Bundesbank will be in the market for approximately EUR1.53bnbn of the 6bn each month.”