Den tyske højesteret har i sin kritik af ECBs opkøbsprogram råbt “ulven kommer.” Man skal ikke tage højesteretten for højtideligt i denne sag, mener Nordea, som venter, at ECB vil opkøbe endnu flere statsobligationer, fordi det ganske enkelt er nødvendigt for at stimulere økonomien.
Uddrag fra Nordea:
On why you shouldn’t trust the German “Cry Wolf” this time either
Bond yields can rise, albeit for the wrong reasons (some would say that it is for the right reasons), in the Euro zone as the German constitutional court challenged the proportionality of the ECB QE (ECB Watch: Three months and you’re out). “Laywer-Germany” has hated the QE program for years, so the threats are not new per se, but the question is if we should trust the German “Cry Wolf” this time? We don’t bet so.
First, the German ECB member Isabel Schnabel went on stage in a full-blown defence of the ECB policy among other things saying that “… the potential side effects of these monetary policy measures … are based on half-truths and false narratives. The excessive criticism of the ECB is dangerous because it not only jeopardises trust in our single monetary policy, but also undermines European cohesion.” To us this is a signal that German politicians are behind the ECB.
Second, if the German Court wants the ECB to move a few commas, they would need to threaten them with doom and gloom, otherwise nothing happens. It could be “negotiation tactics” in that sense, which ultimately also means that the GCC will accept the “clarifications” from the ECB, when they respond.
This doesn’t necessarily mean that Ital-German spreads will remain tight by the way, but we consider it a VERY low probability event that the GCC pulls the rug from under Bundesbank participance in the QE program. And would it matter a whole lot anyway? ECB could in principle just continue buying everything but German bonds, if the Bundesbank is left out (of course this would challenge the long-term EUR picture severely)
Intra Euro area spreads could widen anyway as EUR 1500bn worth of net supply (more than official forecasts but still conservative IOHO) will flood EUR Govie markets and the ECB would fall at least EUR 500bn short of buying it all. The last time the net issuance adjusted for central bank purchases reached such levels was in 2011-2012 and we assume that we don’t have to remind you of what happened back then? The ECB will probably have to buy (a lot) more as they are the only game in town, and ultimately they are also in charge of gluing together the EUR again. With a firmer confirmation of a whatever it takes 2.0 approach, we would look at buying EUR vs. USD, but for now markets will be trading the increasing break-up risk. Ultimately, we think such positions will be run over by a EUR liquidity steamroller (don’t ever underestimate EUR-crats), but we agree to the direction for the time being – i.e. wider EUR spreads and no reason to buy EUR/USD (yet) etc.
