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Expiries for Jun15 NY cut 1000ET (Source DTCC)

GILT SUMMARY

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FED

NY Fed Operational Purchase

US EURODLR OPTIONS

Mixed Trade, Vol Soft/Off Lows

US EURODLR OPTIONS

Mixed Trade, Vol Soft/Off Lows

By Luke Heighton
     FRANKFURT (MNI) - The ECB may not need to delay its first hike to key
interest rates, Bundesbank Executive Board member Sabine Mauderer said Friday,
as "insecure phases" give way to "ensured" euro-area growth.
     Mauderer also said the ECB would have to decide whether to issue another
round of TLTROs and whether to continue to provide banks with unlimited cash
through its regular tender operations.
     Here are key points from her speech in Hamburg:
     -- She cautioned against accepting market assumptions that the ECB's
timetable for key interest rate hikes has been delayed, and said that at its
meeting in January, "the Governing Council of the ECB continued to be confident
that underlying inflation in the euro area would gradually rise and that
inflation would reach its target level of just under 2% over the medium term."
     --Mauderer cited favourable financing conditions, continued employment
growth and increased wage growth as factors that "should ensure continued growth
in the euro area," but asserted: "The exact monetary policy roadmap is dependent
on future economic data, especially on the inflation outlook."
     --"Insecure phases are part of monetary policy, and they should not throw
us off track", Mauderer said. "In any case, this process of normalization is
likely to take several years". It is therefore "all the more advisable not to
waste time unnecessarily," she added.
     --The ECB's stated intention to continue reinvestments well beyond the
first increase in key interest rates makes it clear that the first rate hike
should come before any reduction in the ECB's balance sheet. The ECB will also
have to decide in 2019 whether or not to continue providing banks with unlimited
0% cash in its one-week and three-month full allotment tender operations, due to
expire in 2020.
     --Regarding targeted longer-term refinancing operations, Mauderer said it
would be up to the ECB's Governing Council to decide "whether such transactions
are still necessary from a monetary policy perspective and, if so, in what form.
By and large, it will be about how the refinancing of the banks should look in
the future."
--MNI Frankfurt Bureau; +49-69-720-146; email: luke.heighton@marketnews.com
--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com
[TOPICS: M$X$$$,MT$$$$,M$$EC$]