Note this comes from Credit Suisse’s equity strategists… but we think this is a forecast worth passing on all the same:
The stigma of borrowing from the ECB appears to have been removed as signalled by ING and Rabobank’s willingness to use the facility. The huge expansion in eligible collateral opens the possibility of €1trn+ for another LTRO in February. (The collateral requirements are set by national central banks not the ECB, according to our economists.) This is printing money and the increase in the ECB balance sheet from its recent 3 year LTRO in December and a likely €1trn in February would mean the expansion in the ECB’s balance sheet since the Lehman crisis would have been greater than the expansion by the Fed.
A reminder that the second, and last, of the ECB’s operations to lend three-year funding lands on 28 February. The previous LTRO tapped €489bn.
Debate the “printing money” point as you will, as well as the ultimate destination of all this LTRO cash. Still — any bigger LTRO predictions out there?
Update (1345 UK time) – Here’s one a mere €750bn or so under the Credit Suisse team’s estimate…
RTRS-REUTERS POLL-ECB SEEN ALLOTTING 263 BLN EUROS AT SECOND THREE-YEAR TENDER IN FEBRUARY (489 BLN AT LAST SALE)