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ECB announced taking up first TLTRO - BAML

FXStreet (Guatemala) - Analysts at Bank of America noted that yesterday morning, the ECB announced the take-up at its first TLTRO.

Key Quotes:

The amount surprised to the downside at €82.6bn, slightly below our expectation of €90-130bn and well below consensus of €150bn."

"As we had highlighted in our preview, a low take-up saw the market call for increased ECB intervention in the form of a larger asset purchase program”.

“EUR rates sold off, especially in the 7y, and peripheral spreads tightened. After all, if the ECB targets a specific c.€1tn balance sheet expansion, it would have to compensate for the more modest increase in lending operations, by considering larger purchases”.

"Here, we dig deeper into the details of the take-up based on banks' own comments. We find core banks might have borrowed as little as 10% of their allowance."

"Still, the Dec operation could allow for TLTRO borrowings close to our total forecast of €260bn for Sep+Dec. Prospects of a larger take-up in Dec could allow the ECB to resist pressures of bigger asset purchases in the medium term."

"We, therefore, fade the move higher in rates, and recommend buying 7y France. We also caution about front-end positions ahead of Tuesday's MRO."

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