A glimpse on what extra Draghi’s monetary policy has delivered

Draghi has delivered it finally to disappoint markets, contrary to past experience but as we feared given the high expectations. While the deposit rate was cut 10bp, asset purchases will not be accelerated.

Although running for longer (at least until March 2017) with new regional and local government bonds now also available.

• Deposit rate cut by 10bp to -0.30% (expectations min 15 bps), judging by other central banks, suggesting room for schemes in the future.
  
  
• The asset purchase programme (APP) will continue for longer, until March 2017 at least, but at a steady pace of €60bn a month. We expect purchases to end only in end-2017.
  
  
• Reinvestment of maturing bonds was the one more highlight of ECB last night. This announcement comes earlier than expected (starting in H1 2017), and counterbalances some of the expected decline in the ECB's balance sheet (due to maturing TLTROs).
  
  
• Including regional and local government bonds. We expected also corporate bonds, which due to low liquidity is probably no longer in the cards. Buying regional bonds will help the ECB finding sufficient volumes of assets, German in particular, as the APP continues for longer.
  
  
• The full allotment procedure of the main refinancing operations will continue for as long as necessary.