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MNI (London)
By Luke Heighton
     FRANKFURT (MNI) - A fresh round of targeted long-term refinancing
operations (TLTROs) was announced by the European Central Bank Thursday, while
key interest rates will remain unchanged "at least through the end of 2019."
     TLTRO III will be launched in September this year and end in March 2021,
each with a maturity of two years.
     Full details will be announced "in due course," the ECB said, but
counterparties will be entitled to borrow up to 30% of the stock of eligible
loans as at February 28 2019 at a rate indexed to the interest rate on the main
refinancing rate over the life of each operation.
     In another significant move, the ECB also changed its forward guidance on
the timing of key interest rate rises from "at least through the summer of 2019,
and in any case for as long as necessary..." to "at least through the end of
2019, and in any case for as long as necessary" to ensure the continued
sustained convergence of inflation to levels below, but close to, 2% over the
medium term.
     Enhanced forward guidance on the reinvestment of principal payments from
maturing securities purchased under the ECB's asset purchase programme remains
couple to the timing of increases in key interest rates, it was confirmed.
     Fixed rate tender procedures with full allotment will also continue "for as
long as necessary," the ECB announced, "and at least until the end of the
reserve maintenance period starting in March 2021.".
     The full text is below:
     Monetary policy decisions
     At today's meeting the Governing Council of the European Central Bank (ECB)
took the following monetary policy decisions:
     (1) The interest rate on the main refinancing operations and the interest
rates on the marginal lending facility and the deposit facility will remain
unchanged at 0.00%, 0.25% and -0.40% respectively. The Governing Council now
expects the key ECB interest rates to remain at their present levels at least
through the end of 2019, and in any case for as long as necessary to ensure the
continued sustained convergence of inflation to levels that are below, but close
to, 2% over the medium term.
     (2) The Governing Council intends to continue reinvesting, in full, the
principal payments from maturing securities purchased under the asset purchase
programme for an extended period of time past the date when it starts raising
the key ECB interest rates, and in any case for as long as necessary to maintain
favourable liquidity conditions and an ample degree of monetary accommodation.
     (3) A new series of quarterly targeted longer-term refinancing operations
(TLTRO-III) will be launched, starting in September 2019 and ending in March
2021, each with a maturity of two years. These new operations will help to
preserve favourable bank lending conditions and the smooth transmission of
monetary policy. Under TLTRO-III, counterparties will be entitled to borrow up
to 30% of the stock of eligible loans as at 28 February 2019 at a rate indexed
to the interest rate on the main refinancing operations over the life of each
operation. Like the outstanding TLTRO programme, TLTRO-III will feature built-in
incentives for credit conditions to remain favourable. Further details on the
precise terms of TLTRO-III will be communicated in due course.
     (4) The Eurosystem's lending operations will continue to be conducted as
fixed rate tender procedures with full allotment for as long as necessary, and
at least until the end of the reserve maintenance period starting in March 2021.
     The President of the ECB will comment on the considerations underlying
these decisions at a press conference starting at 1430 CET today.
--MNI Frankfurt Bureau; +49-69-720-146; email: luke.heighton@marketnews.com
--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com
[TOPICS: M$X$$$,M$$EC$]
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com