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ECB: Demand cooled in TLTRO auction – BBH

FXStreet (Delhi) – Research Team at BBH, note that demand cooled off considerably when today the ECB launched its fifth tranche of TLTRO.

Key Quotes

“In the first four tranches, about 384.2 bln euros have been borrowed. Spanish and Italian banks account for about half of the draw. The consensus was for the facility to be tapped by another 50-60 bln euros, but the banks only took down 15.5 bln euros.”

“The ECB staff cut its GDP and inflation forecasts earlier this month. Officials recognize new downside risks. That also may justify doing more, but there are also technical reasons pushing the ECB in the same direction. The TLTRO channel appears to be nearly exhausted. It ABS purchases appear to be coming more difficult. This may push the ECB in the direction of changing the composition of the assets it is buying.”

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