http://www.bloomberg.com/news/2014-09-16/crashing-bund-forecasts-signal-qe-to-follow-loans-euro-credit.html
Banks are cutting their bund-yield forecasts at a record pace as they bet the European Central Bank’s latest stimulus program will be expanded to buying the sovereign debt of member states.
The ECB will allot the first funds under its four-year lending program, or targeted longer-term refinancing operations, at 11:15 a.m. tomorrow in Frankfurt. President Mario Draghi said this month the ECB will also buy asset-backed securities and covered bonds to boost its balance sheet to 2012 levels, meaning an increase of as much as 1 trillion euros ($1.29 trillion). Investors are watching this year’s tenders for signs of whether the latest measures will contribute enough to achieve that goal.
“It plays into this idea of 1 trillion euros of expansion of the ECB balance sheet and how much of that is going to have to be done by ABS,” said Anthony O’Brien, a fixed-income strategist at Morgan Stanley in London. If TLTRO take-up “is a lower number, does that mean they’re going to have to do more of a full-scale quantitative-easing program to get the balance sheet up?”
Since announcing the new loans in June, the ECB has cut interest rates as well as announced its asset-purchase program. The yield on bunds has halved this year, falling below 1 percent in August, enriching investors who have clung to the security of Europe’s benchmark bonds.
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