From the comments, on the ECB

Ptumov writes:

First, on the market reaction. This action has been leaked/signaled to the markets in many ways over the last month. Therefore, to judge the market reaction to the ECB action, I think one should look at the change from early May to today.

Second, what’s the difference between non-sterilized SMP and QE? Not much, maybe maturity. I think this was the more significant development moving the market over the past month than negative deposit rates.


I still think the general mood is too pessimistic. 3 year LTROs have saved the Eurozone from the inevitable disintegration, so maybe 4 year TLTROs which were announced today will succeed in accelerating the recovery?

This confused me. I thought the SMP was concluded in 2012? Wouldn't they have sterilized once at the time of purchase and been done with it? Or have they been rolling over reverse-repos of equivalent value and that's what they're stopping? But they have been offering fixed rate full allotment MROs. Wouldn't any of the liquidity they removed via the sterilization just be replaced via the MROs? The ECB would be effectively lending the same money it is borrowing.

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