Friday, September 25, 2015

EURUSD: ECB”s disappointing fifth TLTRO - Rabobank

FXStreet (Delhi) – Research Team at Rabobank, note that the take-up in the fifth ECB-TLTRO was disappointing with banks being allotted EUR15.5bn, well below our own forecast range (EUR30-50bn), which itself was relatively modest compared to the consensus.

Key Quotes

“This hammered home the message that although banks are entitled to borrow much more (as lending has improved relative to the benchmark levels set for these operations), they simply have enough liquidity.”

“This also undermines the thesis that higher funding costs for banks incentivise them to borrow more in the ECB’s liquidity operations.”

“Obviously, this outcome provides further fuel to speculation that –if nature takes its course– the ECB will be forced to do more QE. At the margin we saw this lower-than-expected outcome push rates on (front-end) Eonia swap contracts slightly higher (+0.2bp on 6M Eonia swap), whilst the 10y Eonia swap rate actually fell 2bp.”
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