The European Central Bank (ECB) will have to cut its deposit rate further to ensure enough government bonds are eligible for purchase under its sovereign-debt purchase program, Standard Bank PLC said.
ECB President Mario Draghi said in Nicosia, Cyprus, on Thursday that the central bank’s 1.1 trillion euro (US$1.2 trillion) quantitative easing plan will not include debt with yields below its minus-0.2 percent deposit rate. At minus-0.209 percent, the rate on German two-year notes is already below that threshold, while the yields on equivalent Belgian, Austrian and Dutch securities are all within seven basis points of the level.
“There’s a good chance that lower bond yields force the ECB to cut policy rates again — at least the deposit rate,” Steve Barrow, the London-based head of G10 strategy at Standard Bank, wrote in an e-mailed note. “The ECB could be forced to drop the deposit rate in order to widen the bond universe to keep on track with its bond buying plan.”
The ECB last cut its deposit rate in September last year. Central bank officials maintained interest rates at record lows at a policy meeting on Thursday, holding the key refinancing rate at 0.05 percent.
In Asian trading yesterday, the euro remained stuck at 11-year lows after the ECB said it would launch its massive stimulus program next week.
Draghi told a news conference that from Monday the bank would buy 60 billion euros of private and public bonds each month for at least 18 months in a bid to ward off deflation.
He also said it had increased its eurozone growth forecast for this year to 1.5 percent, followed by 1.9 percent next year and 2.1 percent in 2017.
At the same time he forecast inflation at zero this year, lower than previously projected, but added it would pick up to 1.5 percent next year and to 1.8 percent in 2017.
The news pushed the euro below US$1.10 in New York for the first time since September 2003, before it recovered slightly to close at US$1.1028 on Thursday.
Yesterday in Tokyo it bought US$1.1015, well down from levels of about US$1.12 at the beginning of the week.
The single currency also bought ￥132.35 compared with ￥132.50 in US trade.
Additional reporting by AFP
POOR INTERNAL CONTROLS: Insurance Bureau Director-General Shih Chiung-hwa said the company is expected to get back on track while its chairman is suspended The Financial Supervisory Commission (FSC) yesterday fined Shin Kong Life Insurance Co (新光人壽) NT$27.6 million (US$939,415) for a reckless investment that endangered its solvency, and suspended its chairman Eugene Wu (吳東進) for poor supervision. The penalty is the second-highest in a single case after Nan Shan Life Insurance Co (南山人壽) was fined NT$30 million in September last year and its chairman Du Ying-tzyong (杜英宗) suspended for two years, the commission said. In three rounds of special and regular examinations conducted since last year, the commission found that Shin Kong Life had given too much power to an asset and liability management committee
HEAVY INVESTMENT: Moody’s affirmed the firm’s ‘Aa3’ rating with a ‘stable’ outlook due to its leading position in the industry and ability to match customer requirements Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) revenue this year is expected to increase about 21 percent to NT$1.29 trillion (US$44.01 billion) from NT$1.07 trillion last year, driven by strong demand for advanced 5-nanometer and 7-nanometer chips mainly used in smartphones and high-performance computing devices, a Moody’s Investors Service report on Wednesday said. TSMC’s rate of revenue growth next year is to increase to 7.5 percent, the ratings agency said. The company, which supplies 5-nanometer chips for Apple Inc’s new iPad series, has introduced the advanced chips ahead of its competitors and gained a significant share of the market for the foundry industry’s
Sony Corp has cut its estimated Play Station 5 (PS5) production for this fiscal year by 4 million units, down to about 11 million, following production issues with its custom-designed system-on-chip (SOC) for the new console, people familiar with the matter said. The Tokyo-based electronics giant in July boosted orders with suppliers in anticipation of heightened demand for gaming in the holiday season and beyond, as people spend more time at home due to the COVID-19 pandemic. However, the company has come up against manufacturing issues, such as production yields as low as 50 percent for its SOC, which have cut into
O2O BICYCLE SHOW: The Taiwan Bicycle Show next year is to be online to offline, with forums, audio-visual conferences and livestreaming of the offline events Local bicycle makers expect demand to continue outpacing supply due to orders triggered by the COVID-19 pandemic, with some companies seeing orders back up through next year. “Next year is all full in terms of orders. Our lead time on components is one year,” Giant Manufacturing Co Ltd (巨大機械) chairwoman Bonnie Tu (杜綉珍) told a news conference in Taipei organized by the Taiwan External Trade Development Council (TAITRA) to announce next year’s Taipei Cycle Show. The pandemic has reduced bicycle supplies and increased demand around the world, Robert Wu (吳盈進), chairman of KMC (Kuei Meng) International Inc (桂盟國際), one of the world’s