VIEW: Goldman Sachs note that "the ECB's.......>

STIR: VIEW: Goldman Sachs note that "the ECB's asset purchases and upcoming

TLTRO/PELTRO operations are likely to push excess liquidity substantially higher

in the Euro area in coming months. This should exert modest downward pressure on

money market rates-the relationship between ESTR fixes and excess liquidity

(admittedly based on a limited and partial history) shows that EUR500bn of

additional excess liquidity is worth around 1bp in ESTR. Beyond this modest

impact, we are skeptical that the separation of TLTRO bonus rate from the

deposit rate will push ESTR fixings lower. The limited nature of the TLTRO

facility means that it is unlikely to impact marginal funding decisions, and as

a result wholesale borrowing costs (and thus ESTR) are likely to remain anchored

to the Deposit Facility rate. This suggests to us that at least a portion of the

EONIA/ESTR curve reflects additional cuts, something that thus far looks

unlikely given the ECB's (revealed) preference for asset purchases and further

bank refinancing operations."