+------------------------------------------------------------------------------+
Coeure Says ECB Will Face Scarcity, Not Shortage of Bonds for QE 2015-03-10 18:00:00.7 GMT
By Jeff Black (Bloomberg) -- European Central Bank Executive Board member Benoit Coeure says in text of speech in Frankfurt that ECB will be able to meet its targets for buying government debt under its quantitative-easing program. * “While the effective supply of eligible securities is undoubtedly lower than the total amount outstanding, I do believe that it will still be substantially higher than the amounts we intend to purchase” * “If this is the case, there will be a price at which we can buy the quantities needed to meet our monthly targets. In other words, we may face a scarcity of bonds, but we won’t face a shortage” * “There may be good reasons to expect that scarcity will materialize first and foremost in those market segments with a higher duration, potentially helping to maximize the economic impact of our operations” * “To avoid any shortage of assets that are used as collateral, especially at the high end of the credit spectrum, PSPP securities will be made available to the market through securities lending. This will enable securities purchased by the Eurosystem to be used in private transactions and relieve frictions in the functioning of the market, such as failed repo deliveries, which may arise from our purchases” * “We will try to avoid, to the extent possible, purchasing specific securities such as current cheapest-to-deliver bonds underlying futures contracts, securities commanding ‘‘special’’ rates in the repo market as a sign of temporary scarcity, and other assets displaying significant liquidity shortages” * NOTE: ECB’s Plan to Reignite Economy Starts With Slow-Burn Bond Buying
For Related News and Information: First Word scrolling panel: FIRST<GO> First Word newswire: NH BFW<GO>
To contact the reporter on this story: Jeff Black in Frankfurt at +49-69-92041-205 or jblack25@bloomberg.net To contact the editor responsible for this story: Fergal O’Brien at +44-20-3525-7152 or fobrien@bloomberg.net