巴黎银行-欧洲-宏观策略-欧元区：欧洲央行不会推迟购买净资产-20181022-6页_812kb

FLASH | EUROZONE - MARKET SUMMARY

Core Content

This document provides an analysis of the European Central Bank's (ECB) potential decisions regarding the end of net asset purchases (NAP) and reinvestment strategies, based on recent market reports and internal assessments. It is prepared by the Strategist and Economist teams at BNP Paribas (BNPP) and is intended for professional clients and eligible counterparties under MiFID II.

Main Points

ECB's Intent to End Net Asset Purchases

• The ECB is expected to end its net asset purchases in December, not in October as previously speculated.
• The decision will likely be announced in the October meeting, but the central bank may delay the actual end of purchases until year-end.
• The ECB's intention remains clear despite recent reports suggesting otherwise.

Reinvestment Strategy and Operation Twist

• The ECB is likely to maintain maximum flexibility in reinvestment decisions, constrained by the capital key rule.
• An operation twist (i.e., selling longer-dated assets to reinvest in shorter ones) is considered technically feasible, but not in Germany due to scarcity of long-dated assets.
• The operation twist would be used to smooth purchases rather than to change the overall monetary policy stance.

Market Communication and Dovish Offset

• The ECB's ability to offset the end of NAP with dovish communication is limited.
• Mario Draghi is expected to emphasize the end of NAP in his press conference, and any attempt to soften the message could risk market expectations of a postponement.
• The overall message this week is unlikely to change the substance of the ECB's plans, even if the timing is delayed.

Forward Guidance and Policy Adjustments

• A change in forward guidance on interest rates is considered premature at this stage.
• The ECB has limited tools to counteract the effects of ending NAP, and more QE is unlikely due to political controversy.
• Alternative measures, such as new TLTRO programs or more aggressive forward guidance, could be considered, but they would face significant hurdles.

Key Information

• The MNI report suggests that the ECB may delay the end of NAP until December due to market tensions in Italy and the need for more data.
• The operation twist is not feasible in practice in Germany and other countries, but the ECB may still pursue it as a technical tool.
• The ECB's divisions within the Governing Council are evident, particularly regarding the use of operation twists.
• The document includes legal and regulatory disclosures for various jurisdictions, including UK, France, Germany, Ireland, Italy, Netherlands, Portugal, Spain, and Switzerland, highlighting the non-independent research nature and conflicts of interest.

Conclusion

The ECB is still on track to end its net asset purchases in December, and the recent reports do not significantly alter this timeline. While the central bank may attempt to use dovish language to ease the transition, its ability to do so is limited. The operation twist remains a potential tool, but its practical implementation is constrained. The forward guidance on interest rates is not expected to change soon, and any policy adjustments will likely be limited in scope and subject to political and regulatory constraints.

Legal and Compliance Notes

• The document is non-independent research and marketing communication, not investment research.
• It is intended for professional clients and may not be suitable for retail investors.
• BNPP may have conflicts of interest due to its involvement in trading, underwriting, and advisory services.
• The document includes performance data based on back-testing, which is illustrative and not guaranteed.
• Options and ETFs discussed are complex instruments with high risk, and disclosure requirements apply.
• The distribution of the document is regulated in various jurisdictions, and legal restrictions may apply to certain investors.

Jurisdictional Disclosures

• UK: Communicated by BNPP London Branch, authorized by ECB, ACPR, and Prudential Regulation Authority.
• France: Produced by BNPP SA and BNPP Arbitrage, authorized by ECB and ACPR.
• Germany: Distributed by BNPP S.A. Niederlassung Deutschland, authorized by BaFin.
• Ireland: Distributed by BNPP S.A., Dublin Branch, regulated in France.
• Italy: Distributed by BNPP Italian Branch, authorized by ECB and ACPR.
• Netherlands: Distributed by BNPP Fortis SA/NV, Netherlands Branch, authorized by ECB and National Bank of Belgium.
• Portugal: Distributed by BNPP - Sucursal em Portugal, authorized by ECB, ACPR, and Banco de Portugal.
• Spain: Distributed by BNPP S.A., S.E., authorized by ECB and ACPR.
• Switzerland: BNPP (Suisse) SA is authorized as a bank and securities dealer by FINMA.

Important Notes

• This document is not investment research and not for retail investors.
• Confidentiality is required, and the content may not be copied or distributed without prior written consent.
• Performance data is hypothetical and not guaranteed.
• The document may contain restricted securities and is only available to Qualified Institutional Buyers.