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Speaker 1: Global business news twenty four hours a day at Bloomberg

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Speaker 1: dot com, the Radio plus mobile last and on your radio.

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Speaker 1: This is a Bloomberg Business Flash and I'm Karen Moscow.

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Speaker 1: This update is brought to you by eisener Amper. An

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Speaker 1: entrepreneur's face challenges like choosing a business structure or access

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Speaker 1: to capital. They call the accountants and advisors at eisener

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Speaker 1: Apper connect with them eisener Amper dot com, slash Tech,

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Speaker 1: and the European Central Bank and lower ring its benchmark

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Speaker 1: interest rate to zero and cutting its deposit facility rate

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Speaker 1: to minus zero point four percent. Of course, we have

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Speaker 1: much more on this coming up as Bloomberg surveillance continues.

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Speaker 1: Just looking at market reaction, those stocks are jumping in Europe.

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Speaker 1: The decks in Germany now up two point two percent,

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Speaker 1: the CAC in Paris up two point one percent, FT

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Speaker 1: one hundred up six tenths percent, SNPE mini futures now

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Speaker 1: up eighteen points and DOWI mini futures up a hundred nineteen.

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Speaker 1: NASA DOCU mini futures up forty one. Ten year treasury

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Speaker 1: up four thirty seconds, the yield one point eight six percent,

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Speaker 1: and that's a Bloomberg Business Flash, Tom and thank you

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Speaker 1: Karen Moscow. Well, it looks like Mario Drag is throwing

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Speaker 1: the book at the markets, making many changes to monetary policy.

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Speaker 1: For the European Central Bank, they cut the main financing rate,

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Speaker 1: their main benchmark rate to zero, that's a five basis

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Speaker 1: point cut. They lower the marginal lending facility to twenty

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Speaker 1: five basis points, and they cut the deposit rate to

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Speaker 1: negative forty basis points attend basis point cut which had

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Speaker 1: been expected. They are also increasing q E eighty billion

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Speaker 1: euros a month, another twenty billion a month. They are

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Speaker 1: also announcing a new series of long term repot operations

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Speaker 1: with banks, loans to banks. They're expanding q E to

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Speaker 1: include non bank corporate bonds. That is a very interesting

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Speaker 1: change by the e c B. A lot of people

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Speaker 1: did not think they would get to their to that

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Speaker 1: yet Mario Drag says that, or at least the ECB

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Speaker 1: says that the measures will take effect on March sixteen.

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Speaker 1: So an enormous amount of changes in European monetary policy. Tom,

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Speaker 1: and you see it with a movement and yields. Yields

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Speaker 1: went lower and more negative for the German two year

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Speaker 1: they reversed sharply, I would suggest off the corporate paper announcement,

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Speaker 1: the German two year negative point five three two is

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Speaker 1: fractionally less negative. A more positive movement on the German

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Speaker 1: two year. The euro craters not back to any kind

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Speaker 1: of support or to a two standard deviation move but

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Speaker 1: a one oh eight seventy five is in a full

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Speaker 1: hundred and twenty six pips for the Euro. This is

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Speaker 1: a weaker euro. Mike, I would put the mark on

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Speaker 1: support in the vicinity of one oh eight twenty seven

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Speaker 1: fifty year sixty pips away and two standard deviations is

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Speaker 1: one eight thirteen. So we're a bit of ways from

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Speaker 1: any kind of breakdown in the Euro, even though the

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Speaker 1: year's weaker off the announcement. Alright, le's get some expert

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Speaker 1: analysis of this from Brunello Rossof with Rubini Economics. Brunella

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Speaker 1: Barrio Dragon today had a number of alternatives he could

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Speaker 1: have chosen to stimulate growth in the euro Zone. He

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Speaker 1: chose all of them. Basically. Yes, effectively, he when the

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Speaker 1: full monty almost in the sense that he has lowered

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Speaker 1: all the three um policy rates that they had his boso,

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Speaker 1: of course, most notably the deep rate by ten basis point,

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Speaker 1: but also the MTROW by five basis point. That could

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Speaker 1: be important for the pricing on the new tl t ros.

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Speaker 1: Now we need to see what these new t L

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Speaker 1: t ros are about. If there's any um a difference

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Speaker 1: with the previous one that were launched in June twenty fourteen,

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Speaker 1: probably the pricing, as I was saying, is going to

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Speaker 1: be lower due to the law where emer eight. The

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Speaker 1: big suppress if you want, is the increasing the size

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Speaker 1: of TWI from sixty up to immediately eighty billions a month. UH.

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Speaker 1: A seventy billion expansion would have been more likely, but

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Speaker 1: clearly the we didn't want to disappoint the market at

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Speaker 1: this stage. Mike jump in here with Bruno as well.

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Speaker 1: I want to say markets on the move, futures explode

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Speaker 1: called asset friendly of fifteen jowl futures of one oh

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Speaker 1: six to seventeen thousand, twenty the German two years I

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Speaker 1: just put that out and Bloomberg Radio plus it's a

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Speaker 1: five point make it a six percent move. I see

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Speaker 1: no end yet to the surge of German two year

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Speaker 1: yields some negative zero point five six all the way

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Speaker 1: up through negative zero point five one Mike, that bears

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Speaker 1: close watching. Why do you suppose that is But no,

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Speaker 1: we would have thought it would go the other way. Well,

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Speaker 1: we need to see what the positioning was. But if

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Speaker 1: you want to find perhaps more fundamental explanation, if people

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Speaker 1: think that this is a fully reflectionary move in the reality,

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Speaker 1: you should see UM rates to go eventually up. Perhaps

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Speaker 1: the two years a bit uh short maturity to see

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Speaker 1: those kind of movements, but there's the chance that people

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Speaker 1: see this is eventually something that the market could work

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Speaker 1: with in terms of eventually get de declation. Mike, Jamie

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Speaker 1: mcgever over writers just puts out on Twitter or photograph

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Speaker 1: of a kitchen sink that about sums it up. Well.

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Speaker 1: The one thing I may have missed it because there

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Speaker 1: is so much out of the ECB this morning brit Al,

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Speaker 1: but they didn't seem to change the basis on which

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Speaker 1: they make their buying decisions the capital key. So they

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Speaker 1: seem to have addressed that by allowing the central banks

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Speaker 1: to buy the corporate bonds. Yes, I mean the expansion

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Speaker 1: of eligible as it's already happened in December last year

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Speaker 1: when they expanded to a local regional municipal bonds clearly

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Speaker 1: if they want to expand further the pace of US

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Speaker 1: and purchases and and from six to tweight is a

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Speaker 1: big expansion. They needed to find nuances to buy in

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Speaker 1: order to reduce discussity effect that was already affecting UM

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Speaker 1: bood deals. And by the way, this reduction of discuss

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Speaker 1: effect might be also behind the rise in UH some

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Speaker 1: of the bood deals that we were discussing before the

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Speaker 1: shots in that case, So I think that there's also

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Speaker 1: an explanation for what's going on in the market. Now.

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Speaker 1: You know, if this is que tout whatever it is,

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Speaker 1: is there any more ammunition other than the simplicity of

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Speaker 1: just lower rates? How is the toolbox set for Mr

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Speaker 1: Druggy going forward? So they are probably already reaching the limits.

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Speaker 1: So they can do UM given the current tool kit,

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Speaker 1: because you know, in terms of deperate they might they

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Speaker 1: might go perhaps a minus fifty basis point perhaps lightly

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Speaker 1: lower by introducing it to tier preserve system on them.

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Speaker 1: On the que side, UH, they cannot expand and definitely

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Speaker 1: so will. They would need something new to buy. And

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Speaker 1: this new thing is probably something that is not available yet,

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Speaker 1: and it's what you might call urobone, right, something that

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Speaker 1: is created by some form of this comunion that needs

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Speaker 1: to happen in the Eurozone. But as we all know,

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Speaker 1: in order for that to happen, you probably need another

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Speaker 1: crisis first, and then there will be another quantum leap

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Speaker 1: into the eurobonds and then they we will have plenty

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Speaker 1: of stuff to buy. But we're not there yet. Its uh.

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Speaker 1: One of the problems the e CP has faced is

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Speaker 1: we don't get a reaction of monetary policy in the

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Speaker 1: periphery countries, we get in the core. They seem to

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Speaker 1: be wanting to address that with the l t r os.

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Speaker 1: Four years is the term for this, and they can

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Speaker 1: borrow at a rate equal to the deposit rate, so

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Speaker 1: they can you can borrow money and the EASYP essentially

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Speaker 1: is going to be paying you to do it. Yes,

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Speaker 1: um and and but this is something I'm a bit

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Speaker 1: concerned about because we saw what happened when the Alto

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Speaker 1: and even the TMTRO was um introduced. Banks did use

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Speaker 1: those uh dis liquidity to going to and buy the

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Speaker 1: high yielding sovereign credit being the Italian b Titis, Spanish

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Speaker 1: bonus and a bigger filness and all the rest um

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Speaker 1: and uh and instead what we really would like to

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Speaker 1: see is this nexus between banks and sovereigns to be

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Speaker 1: broken eventually? If that happens again, I fear that we

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Speaker 1: are actually making this next is even strong that and

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Speaker 1: so financial stability concernment actually increase is supposed to decrease.

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Speaker 1: Am I correct that the ECB will take in siemens

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Speaker 1: corporate debt. When we say corporate bonds, are they gonna

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Speaker 1: bring in total a franc and semens of Germany. So

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Speaker 1: one of the reasons why we didn't expect this to

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Speaker 1: happen or be announced foreman Is so to speak, is

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Speaker 1: because um, they were already buying some of the corporate

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Speaker 1: bonds of quasi solvents so to speak via the agency

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Speaker 1: program where you had you know that right? So I

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Speaker 1: really want to see how they want to address this

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Speaker 1: because as you can understand, um, they don't want to

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Speaker 1: take as much I could rea, so they cannot be

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Speaker 1: in the high in space. They need that. I like that.

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Speaker 1: You need to see more information in March sixteenth or

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Speaker 1: whatever the data is. But critically, here, did Mario Draggy

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Speaker 1: just make Europe more like Japan? Yeah, we probably made

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Speaker 1: another set and that direction I'm not sure It's a

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Speaker 1: good thing because, as we saw, if you keep on

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Speaker 1: addressing this long term issue with only with monitory instruments

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Speaker 1: and nothing changes on on the physical uh, you're not

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Speaker 1: gonna solve the problem and make it divorced. Thirty seconds left. Uh,

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Speaker 1: we're seeing a big market reaction dragging through the kitchen

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Speaker 1: sink at it. Does the market reaction last or is

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Speaker 1: this just covering positions? Uh, there's a bit of both.

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Speaker 1: But you know, the package is quite significant, so the

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Speaker 1: market is probably going to appreciate the fact that the

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Speaker 1: bank has decided to surprise on the upside this time around,

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Speaker 1: and so this reaction is probably going last, especially under

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Speaker 1: euro dollar, which is probably started at decent to use party.

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Speaker 1: But we don't think it's gonna go to party anytime.

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Speaker 1: So fabulous Brunello rules are just absolutely fabulous. With Robini economics,

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Speaker 1: a euro well moves towards parody one oh nine called

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Speaker 1: one ten to one oh eight fifty UH, US futures

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Speaker 1: surge up nineteen, Dell futures up one, Mario dragging with

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Speaker 1: every tool available. We'll have the press conference at eight thirty.

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Speaker 1: Stay with us