ECB’s Coene told his audience at a seminar that it was very unlikely that the ECB would ever engage in outright quantitative easing, but that it had other tools it could eventually use like lower interest rates further, extent the LTRO’s or doing LTRO’s with private credit claims as collateral. Coene didn’t exclude a cut of the deposit rate to below zero, which might be interesting for money market traders. He assured his audience that the ECB would not lose appetite in purchasing bonds (OMT) like it did for its SMP because the purchases were now directly linked to countries submitting themselves for fiscal rehabilitation programmes.
Coene very interestingly said that the new OMT programme had some built-in limits on how much it could spend by design, because the ECB would only buy bonds with a remaining maturity of 3 years and will not purchase anything issued after the start date of the programme. This is, to our knowledge, new information. It of course amends the so-called unlimited character of the programme, while it prevents governments to take advantage of the programme and start massively issuing at the short end of the curve. We think it is a very clever element of the programme that will also suit the sceptic members of the Council. Finally, Coene said that the ECB would take losses on any bonds bought under OMT, but refused to rule out that the ECB would accept losses on its Greek bond exposure acquired under the SMP programme. Coene also put pressure on Spain to ask for assistance and conditionality.