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MNI BRIEF: Safe Asset Scarcity Good For Transmission-ECB Paper

(MNI) Frankfurt

The scarcity of euro area safe assets as a result of the European Central Bank's Public Sector Purchase Programme (PSPP) led to significant decreases in repo market refinancing costs for those German and European banks already holding them, a paper published by the Bundesbank argues, leading to higher profits in repo intermediation business, increased credit supply and lower rates for short-term corporate loans.

The scarcity of safe assets therefore had positive effects both for the owners of safe assets and the euro area monetary policy transmission mechanism, author Johannes Tischer concludes.

MNI London Bureau | +44 20 3983 7894 |
MNI London Bureau | +44 20 3983 7894 |

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