At the ECB much effort is going into drawing up the way they will communicate. It is important to them that the market continues to believe that they will ‘do what it takes’ even if the ECB might fall short of details. This because in part some are still under discussion and in part because the ECB wants to exert caution ahead of the German constitutional court ruling on 12 September.

Exerting caution is likely to apply to the issue of seniority. We might not get anything concrete on this but merely a statement along the lines that they are still working on this. They are aware that if they do not address it it will be raised in the Q&A.

When it comes to yield/spread caps, these are under consideration but the sense is that no targets will be announced, certainly not at this juncture. Also, as I have often said, it’s not the ECB style to announce targets that can be tested.

The ECB is adamant that the facility needs to have a new name, not SMP2 or anything along the SMP lines. This because they want the market to understand that this is a new facility and to break with the perception attached to the SMP which was that it was more temporary and more limited.

As for transparency, the ECB is adamant that the new facility will be more transparent than the SMP but not ex-ante along the lines of QE – i.e. no amounts or maturities will be announced beforehand, but ex-post.

When it comes to maturities, the ECB does not think it makes any sense to announce merely bills if they have stated that they would buy bonds. The buying is likely to be unsterilized since sterilising never made any sense in an environment where funding to banks is unlimited.

As for purchases of bonds of programme countries, these are not being contemplated yet. The ECB is waiting for Spain to put in a request.

Finally, conditionality. This is the Bundesbank request. The Bundesbank is pushing big time on this front and ideally wants the troika to be part of the conditionality when the MoU is drawn up.

Note that we have kept our 25 repo rate cut forecast. This because on the economic fundamental side nothing has changed. But the ECB is discussing it with one camp feeling that it makes little sense to cut the repo if the depo rate is left at zero while others feel that if little substance is delivered it would be good to at least give a repo rate cut. To take the deposit rate below zero does not seem to be on the cards at this juncture.

Note also that the ECB will release new forecasts. We expect little change on the growth front, leaving the economy in recession this year and anticipating very subdued growth in 2013. Inflation will be revised up in 2013 from the current 1.6% nearer to 2% on account of higher energy prices and the forthcoming Spanish VAT increase. But for monetary policy it is 2014 inflation that matters and that forecast will not be released until December.

On balance, the ECB is very frustrated at the moment that Spain is refusing to ask for help. And Spain might continue frustrating them. PM Rajoy finds it a stigma to accept that the country is bankrupt. One of his right hand men is also advising him to continue to hold out in order to get lighter conditionality. And once more, there are regional elections – Galicia and the Basque region, at the end of October/early November which might come into consideration. In Galicia polls are putting Rajoy’s centre-right PP party at risk at the moment. Earlier this year, Rajoy kept the Spanish budget under wraps until after the Andalucia election at the end of March. In retrospect that was a mistake but he might not have learned and hopes to hold out until after the regional elections are out of the way again. And the Spanish treasury apparently has enough cash to cover October redemptions.

Snappade även upp den här..

https://www.avanza.se/aza/press/press_article.jsp?article=227528

tick tack tick tack