{"id":16134,"date":"2017-09-18T13:23:05","date_gmt":"2017-09-18T10:23:05","guid":{"rendered":"http:\/\/bestinsurance.gr\/a1\/?p=16134"},"modified":"2017-09-18T13:23:05","modified_gmt":"2017-09-18T10:23:05","slug":"dont-worry-ecb-stimulus-even-bond-buying-stops","status":"publish","type":"post","link":"https:\/\/bestinsurance.gr\/a1\/archives\/16134","title":{"rendered":"Don\u2019t Worry About ECB Stimulus Even After Bond Buying Stops"},"content":{"rendered":"

Don\u2019t Worry About ECB Stimulus Even After Bond Buying Stops.As the European Central Bank brainstorms scenarios for winding down its 2.3 trillion-euro ($2.8 trillion)\u00a0asset-purchase\u00a0program, there is what may sound like\u00a0a chicken-and-egg<\/a> problem to solve.<\/p>\n

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It goes as follows: when the central bank buys bonds and its balance sheet grows, is it the former or the latter that\u00a0gives policy makers\u00a0more bang for their\u00a0buck? And what happens when the balance sheet stops growing and the ECB\u00a0just continues reinvesting income from\u00a0maturing bonds\u00a0as it has pledged to do? Will the stimulus continue to work?<\/p>\n

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Marion Amiot, a senior eurozone economist at Oxford Economics, decided to investigate. She calculated the impact that a 20 billion-euro reduction in the flow of purchases would have on German bond yields and compared her results with an equivalent decline in central bank\u2019s assets. The same experiment was repeated to measure the effect the cutback would have on the exchange rate.<\/p>\n

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What she found is that a reduction in monthly purchases of this magnitude would lift yields by 0.2 of a basis point within five months and boost the euro by 0.04 percent\u00a0within two months. Not much and the effect\u00a0would largely fade afterwards anyway.<\/p>\n

In the case of a reduction in the stock of purchases, the immediate impact\u00a0would be\u00a0similar. But it\u00a0would grow over time, lifting German bond yields by 0.2 basis-point within 2 years and strengthen the euro by 0.05% within nine months.<\/p>\n

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That leads Amiot to conclude that \u201cthe stock effect is more persistent than the flow effect,\u201d she writes in her report, and \u201cas long as market participants expect the central bank to continue to hold assets on its balance sheet and maintain bond scarcity, the ECB\u2019s stock of assets will continue to weigh on bund yields and the euro.\u201d<\/p>\n

To put things into perspective, the total stock effect of the ECB’s 2.3 trillion-euro program has been to depress bond yields by 30-40 basis points and the exchange rate by 7-10 percent, according to Amiot’s calculation. \u00a0However, it has varied across member states with the so-called periphery countries of the euro area being the biggest beneficiaries of the program.<\/p>\n

The start of a gradual reduction in purchases from the beginning of next year is now seen as a given after Draghi said the economic outlook has improved. Even then, the ECB is considering softening the blow <\/a>by emphasizing the impact of the reinvestment of maturing debt. That will average 15 billion euros a month in 2018, according to euro-area central bank officials familiar with the matter.<\/p>\n

So the bottom line is that \u201cwith the ECB unlikely to shrink its balance sheet before 2025, there\u2019s unlikely to be much upside for bond yields until then,\u201d concludes Amiot.<\/p>\n

Source:link<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Don\u2019t Worry About ECB Stimulus Even After Bond Buying Stops.As the European Central Bank brainstorms scenarios for winding down its 2.3 trillion-euro ($2.8 trillion)\u00a0asset-purchase\u00a0program, there is what may sound like\u00a0a chicken-and-egg problem to solve. It goes as follows: when the central bank buys bonds and its balance sheet grows, is it the former or the<\/p>\n","protected":false},"author":1,"featured_media":10435,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[2],"tags":[],"class_list":["post-16134","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-2"],"jetpack_publicize_connections":[],"_links":{"self":[{"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/posts\/16134","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/comments?post=16134"}],"version-history":[{"count":1,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/posts\/16134\/revisions"}],"predecessor-version":[{"id":16135,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/posts\/16134\/revisions\/16135"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/media\/10435"}],"wp:attachment":[{"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/media?parent=16134"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/categories?post=16134"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/tags?post=16134"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}