巴黎银行-欧洲-宏观策略-欧洲央行量化宽松：市场将如何反应？-20191025-6页_672kb

ECB QE: Market Reaction Analysis

Core Content

This document provides an analysis of the European Central Bank’s (ECB) quantitative easing (QE) program, specifically the Corporate Sector Purchase Programme (CSPP), and its potential impact on the credit market. It outlines the expectations for ECB purchases, the relative performance of eligible and non-eligible bonds, and the outlook for High Yield (HY) and Investment Grade (IG) sectors. The report is authored by credit strategists at BNP Paribas and is intended for professional clients and relevant investors.

Main Views and Key Insights

1. ECB QE Program Overview

• The ECB is expected to restart the Asset Purchase Programme (APP) at €20bn per month starting 1 November 2019, with the program likely to continue until the central bank is ready to raise interest rates, currently anticipated in 2022.
• The CSPP is expected to represent 10-12% of the APP, with monthly purchases of €2-2.5bn.
• There is potential for the CSPP to exceed these expectations due to high PSPP redemptions and issuer/issue limits.

2. Market Reaction to ECB QE

• CSPP-eligible bonds have underperformed non-eligible bonds. The 2016 experience suggests that ECB buying could lead to a further 10bp outperformance.
• Single-A paper remains attractive in relative value, as its performance is negatively correlated with interest rates. The ECB’s preference for single-A credits is expected to provide additional support.
• HY is expected to outperform IG. Based on the relative performance during CSPP1, the report supports the recommendation for HY to outperform IG into year-end.
• Spreads are expected to tighten by around 10bp across both $ IG and € IG by year-end, driven by a more bullish market sentiment on growth as trade war and Brexit risks decline.

3. Factors Influencing CSPP Purchases

• Capped PSPP redemptions will likely divert more demand into the CSPP. In 2018, the ECB increased its reliance on the corporate bond market due to PSPP redemptions.
• CSPP-eligible net supply is expected to remain robust, despite a projected decline in € IG net supply. This suggests that ECB buying could be sustained.
• Limited net supply in Covered bonds and ABS will further divert demand to the CSPP, as these markets are less attractive for ECB purchases.

4. ECB Purchase Criteria

• The eligibility criteria for € Corporate bonds under CSPP remain unchanged, except that the ECB can now buy bonds trading below the deposit rate at -0.5%. However, this change has not significantly impacted the market due to the current low yield environment.

5. Investment Recommendations

• Buy CSPP-eligible bonds: The initial reaction to the CSPP announcement in 2016 was a rally in eligible bonds, and the current underperformance suggests potential for a similar rebound.
• Buy € HY: The 2016 experience shows that HY outperformed IG during the CSPP phase, and this trend is expected to continue.

Key Charts and Data

• Chart 1: CSPP share increased in 2018 due to PSPP redemptions and issuer/issue limits.
• Chart 2: Heavy PSPP redemptions in the next six months could divert demand to CSPP.
• Chart 3: € Corporate net supply by eligible issuers shows a robust trend.
• Chart 4: CSPP-eligible bonds have underperformed non-eligible bonds historically.
• Chart 5: The proportion of single-As in the ECB's eligible universe is significantly higher than in the market.
• Chart 6: HY has potential to outperform further, as seen in 2016.

Important Disclosures

• This document is a marketing communication and not a research report. It is intended for professional clients and relevant investors.
• The views expressed are not necessarily those of the BNP Paribas Research Department and may differ.
• The authors may have trading positions or strategies that are not aligned with the views expressed.
• BNPP may trade in the instruments discussed, and this may affect the objectivity of the analysis.
• The document includes important legal and regulatory disclosures regarding conflicts of interest, compensation, and the nature of the content.

Conclusion

The ECB’s restart of the QE program is anticipated to have a positive impact on the credit markets, particularly on CSPP-eligible bonds and High Yield sectors. The analysis suggests that the market could see a significant spread compression due to the ECB’s support and the expected decline in macroeconomic risks. Investors are advised to consider these insights in the context of their own investment strategies and to seek further information from BNP Paribas if needed.