The European Central Bank signalled faster money-printing on Thursday to keep a lid on euro zone borrowing costs.
The news sent Germany’s 10-year government bond yield as much as 6 basis points lower to -0.368%, the lowest since Feb. 18, while the euro stuck to its course with a 0.2% gain against the U.S. dollar.
CARSTEN BRZESKI, GLOBAL HEAD OF MACRO AT ING
“After the recent increase in bond yields and heating up of inflation fears, market participants had started to speculate whether and how the ECB would react to these changes. The just-released statement suggests that the ECB is trying to demonstrate its willingness to put a cap on bond yields without showing signs of panic.
Markets are currently discussing the statement that the total size of the asset purchases could be increased. However, this statement was already included in the January statement.”
RUPERT THOMPSON, CHIEF INVESTMENT OFFICER AT KINGSWOOD
“The move didn’t require the ECB expanding the size of its €1.85trn quantitative easing program as this runs until next March and already gives it scope to purchase another €1trn of bonds.
“The action occurs against the backdrop of the disappointingly slow vaccine roll-out, which is delaying the economic recovery in the Eurozone, and also the fiscal stimulus in the region being considerably smaller than that now underway in the US.”
NICK KOUNIS, HEAD OF FINANCIAL MARKETS RESEARCH AT ABN AMRO
“Overall, it is clear that the ECB has now drawn a line in the sand in terms of curve steepening. This is an important signal as the central bank has significant firepower in terms of net asset purchases. In addition, it has other tools it can use.
“Most importantly, the ECB can enhance its forward guidance to rein in market rate hike expectations. It could do this indirectly by signalling an even longer period of net asset purchases under the PEPP. This could be a credible signal that the deposit rate will remain on hold for longer than markets were pricing in, given that the policy rate will not go up before asset purchases end.”
IMA SAMMANI, FX MARKET ANALYST AT MONEX EUROPE
“The big question for the ECB heading into today’s meeting is whether the Governing Council was going to rally behind a common message in relation to the recent rise in euro-area yields. That question has been answered with the ECB coming straight out of the block with the announcement that PEPP purchases will be ‘significantly’ ramped up in the coming quarter.”
ANDREW KENNINGHAM, CHIEF EUROPE ECONOMIST, CAPITAL ECONOMICS
“The ECB’s policy statement is more dovish than most had anticipated. (It) suggests that the ECB aims to correct the mis-match between its dovish rhetoric and apparent policy of benign neglect over the past two weeks or so.”
“During the press conference, we would now look for any hints as to how much is ‘significantly higher’ (PEPP), what was the threshold to action to determine whether that may be sustained longer, and what impact the recent increase in rates has had on their overall outlook. EURUSD and European rates markets had a knee-jerk move lower, but follow through will depend on the message from the press conference.”