mercredi 11 mars 2015
ECB’s Nowotny Says Successful QE to Lift Bond Yields Above Zero
Posted on 07:51 by nice news
European Central Bank Governing Council member Ewald Nowotny said negative bond yields in the euro area probably aren’t here to stay.
“If we enter a more normal phase of inflation expectations, that will also be reflected in yields,” the Austrian central-bank governor said in an interview with Bloomberg on Wednesday. “I don’t think one can assume that we will have a very long phase of negative yields if this program is successful.”
Unlike earlier quantitative-easing programs by the U.S. Federal Reserve and Bank of England, the ECB’s 1.1 trillion-euro ($1.2 trillion) asset-purchase plan that started on March 9 must deal with a market where a large share of bonds have negative yields. That exposes the national central banks to losses, a fact that Nowotny said threatens to damage their reputations.
“There is an inherent risk of future losses if we buy at negative yields, so basically, one would like to avoid those future losses by buying longer maturities,” Nowotny said. “Engaging in foreseeable losses is something that may come with a reputational risk for central banks.”
German 10-year bonds pared gains after the comments were published. The yield stood at 0.22 percent after reaching 0.198 percent earlier, the lowest level since Bloomberg began collecting the data in 1989.
Yield Distortion
While QE started with the purchase of 3.2 billion euros of debt on its first day, according to ECB Executive Board member Benoit Coeure, p
“If we enter a more normal phase of inflation expectations, that will also be reflected in yields,” the Austrian central-bank governor said in an interview with Bloomberg on Wednesday. “I don’t think one can assume that we will have a very long phase of negative yields if this program is successful.”
Unlike earlier quantitative-easing programs by the U.S. Federal Reserve and Bank of England, the ECB’s 1.1 trillion-euro ($1.2 trillion) asset-purchase plan that started on March 9 must deal with a market where a large share of bonds have negative yields. That exposes the national central banks to losses, a fact that Nowotny said threatens to damage their reputations.
“There is an inherent risk of future losses if we buy at negative yields, so basically, one would like to avoid those future losses by buying longer maturities,” Nowotny said. “Engaging in foreseeable losses is something that may come with a reputational risk for central banks.”
German 10-year bonds pared gains after the comments were published. The yield stood at 0.22 percent after reaching 0.198 percent earlier, the lowest level since Bloomberg began collecting the data in 1989.
Yield Distortion
While QE started with the purchase of 3.2 billion euros of debt on its first day, according to ECB Executive Board member Benoit Coeure, p
ECB’s Nowotny Says Successful QE to Lift Bond Yields Above Zero
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