This website collects cookies to deliver better user experience. Cookie Policy
Accept
Sign In
The Wall Street Publication
  • Home
  • Trending
  • U.S
  • World
  • Politics
  • Business
    • Business
    • Economy
    • Real Estate
    • Markets
    • Personal Finance
  • Tech
  • Lifestyle
    • Lifestyle
    • Style
    • Arts
  • Health
  • Sports
  • Entertainment
Reading: European Banks Prepare for Pullback in ECB Stimulus
Share
The Wall Street PublicationThe Wall Street Publication
Font ResizerAa
Search
  • Home
  • Trending
  • U.S
  • World
  • Politics
  • Business
    • Business
    • Economy
    • Real Estate
    • Markets
    • Personal Finance
  • Tech
  • Lifestyle
    • Lifestyle
    • Style
    • Arts
  • Health
  • Sports
  • Entertainment
Have an existing account? Sign In
Follow US
© 2024 The Wall Street Publication. All Rights Reserved.
The Wall Street Publication > Blog > Markets > European Banks Prepare for Pullback in ECB Stimulus
Markets

European Banks Prepare for Pullback in ECB Stimulus

Editorial Board Published December 22, 2021
Share
European Banks Prepare for Pullback in ECB Stimulus
SHARE

Banks in Europe are issuing a particular type of bond in droves, locking in super low borrowing costs ahead of possibly tighter monetary policy in 2022.

Issuance of covered bonds—a type of debt sold by lenders—recently rose to the highest monthly level since before the pandemic began, according to data from Natixis. Banks sold 20.8 billion euros’ worth, equivalent to around $23.5 billion, in September and 13.6 billion euros in October. In December, banks sold more than last year, although issuance typically slows during this month.

Major lenders that have issued covered bonds this quarter include France’s Société Générale SA, Amsterdam-based ING Groep and Italy’s UniCredit SpA.

Banks are trying to get ahead of central-bank policy shifts by issuing debt while interest rates are still low. Globally, corporate debt issuance has stayed strong, defying expectations that the market would calm after companies built up cash cushions last year due to pandemic-fueled uncertainty. Financial firms raised more debt this quarter than in any fourth quarter in the last 15 years, according to Dealogic.

“The threat of inflation, which will underpin a potential rate increase, or less liquidity provided by the central banks,” is the reason corporations and financial firms have been issuing more debt, said Gabriel Levy, global head of debt capital markets at Natixis.

For European banks, what matters most is the fate of an European Central Bank’s targeted long-term refinancing operations, known by the acronym TLTRO. The ECB supplied trillions of euros to commercial banks though the program earlier in the pandemic and there are currently 1.6 trillion euros of loans still outstanding. However, last week, the ECB said the special conditions under the program, such as favorable interest rates, are expected to end in June.

Covered bonds are a popular alternative funding source for banks in Europe, and are considered to be ultrasafe. Banks package a pool of public-sector loans or mortgages as a new debt security. The bond reflects the underlying creditworthiness of the bank because if a loan or mortgage in the pool defaults, the bank replaces them with a performing loan. S&P Global rates 80% of covered bonds AAA.

Buyers of covered bonds include insurers, pension funds and other banks. The ECB also buys them under its broader asset-purchase program.

“We expect more issuance [of covered bonds] to come in the next year to repay the TLTRO, if the ECB will not renew the facility,” said Stefan Porro, chief financial officer of UniCredit.

Surging consumer prices prompted central banks in the U.S., U.K. and eurozone to outline plans for reducing stimulus last week. The Federal Reserve said it would accelerate a tapering of its bond purchases, while the Bank of England raised its key policy rate. The ECB said it planned to end its emergency bond-buying program by March, but would increase broader asset purchases to smooth the transition.

Higher than expected inflation could force the ECB’s hand to tighten more quickly, with debt markets signaling that the central bank may have to act more forcefully. Spreads, or the difference between a bond yield and a benchmark, have begun to widen in the corporate debt market as investors anticipate less demand from ECB purchase programs, and price in risk from the Omicron Covid-19 variant. BNP Paribas forecasts that the central bank’s spending on corporate debt will halve by the second half of 2022.

The Federal Reserve says it will accelerate the wind-down of its bond-buying program, the biggest step the central bank has taken in reversing its pandemic-era stimulus. Here’s how tapering works, and why it sends markets on edge. Photo illustration: Adele Morgan/WSJ

Write to Anna Hirtenstein at [email protected]

Copyright ©2021 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the December 23, 2021, print edition as ‘Banks Prep for Tighter ECB Policy.’

TAGGED:MarketsPAIDWall Street Publication
Share This Article
Twitter Email Copy Link Print
Previous Article Both Manchin and Biden Are Wrong About Build Back Better’s Inflation Impact Both Manchin and Biden Are Wrong About Build Back Better’s Inflation Impact
Next Article Codecademy Strikes 5 Million Sale to Prosus-Backed Skillsoft Codecademy Strikes $525 Million Sale to Prosus-Backed Skillsoft

Editor's Pick

Brooke Hogan Written Out of Hulk’s Will (At Her Personal Request)

Brooke Hogan Written Out of Hulk’s Will (At Her Personal Request)

Studying Time: 3 minutes Brooke Hogan isn’t in her dad’s will, a brand new report reveals. Regardless of years of…

By Editorial Board 4 Min Read
Workforce of rat-hunting terriers helps remedy Bay Space metropolis’s infestation drawback
Workforce of rat-hunting terriers helps remedy Bay Space metropolis’s infestation drawback

Recognized for his or her innate looking talents, these small furry pals…

3 Min Read
Males’s Pure Skincare Is Booming — Right here’s Why Horace Is on the Heart of It | Fashion
Males’s Pure Skincare Is Booming — Right here’s Why Horace Is on the Heart of It | Fashion

We independently consider all advisable services. Any services or products put ahead…

22 Min Read

Oponion

In Jeddah, US 'cajoling' Ukraine into accepting concessions, no point out of Russia providing something

In Jeddah, US 'cajoling' Ukraine into accepting concessions, no point out of Russia providing something

Ukraine mentioned talks with the US in Saudi Arabia started…

March 11, 2025

Joe Biden halts plan to pay illegal immigrant families separated at border

The federal government has pulled out…

December 16, 2021

TSA reveals high uncommon finds at airport safety checkpoints in 2024

Many Individuals flew throughout the U.S.…

January 10, 2025

Fifties Males’s Trend – Timeless Mid Century Model | Fashion

We independently consider all advisable services.…

January 30, 2025

Armed Standoff vs. Employees, Authorities Amenities Bomb Threats, Result in Arrest of Affected person at Space Hospital

FROM THE WEST VIRGINIA STATE POLICE…

July 23, 2025

You Might Also Like

Markets now betting Fed will minimize charges in September after disappointing jobs report
Markets

Markets now betting Fed will minimize charges in September after disappointing jobs report

Morgan Stanley Wealth administration CIO Lisa Shalett joins ‘Barrons Roundtable’ to research the present market outlook for traders after the…

3 Min Read
ETF buyers take ‘man of steel’ view, inflows on tempo for file 12 months
Markets

ETF buyers take ‘man of steel’ view, inflows on tempo for file 12 months

Vertiv CEO Giordano Albertazzi discusses AI energy firms on 'The Claman Countdown.' Regardless of the whiplash of President Donald Trump’s…

4 Min Read
Tesla grants Musk large pay deal to maintain CEO on board amid authorized battle
Markets

Tesla grants Musk large pay deal to maintain CEO on board amid authorized battle

William Blair power and energy applied sciences group head Jed Dorsheimer discusses what to look out for after the Tesla…

4 Min Read
Microsoft joins unique T market cap membership after AI surge, becoming a member of just one different firm
Markets

Microsoft joins unique $4T market cap membership after AI surge, becoming a member of just one different firm

Angelo Zino, a CFRA Analysis senior fairness analyst, discusses the efficiency of Microsoft, Meta and the general tech sector within…

4 Min Read
The Wall Street Publication

About Us

The Wall Street Publication, a distinguished part of the Enspirers News Group, stands as a beacon of excellence in journalism. Committed to delivering unfiltered global news, we pride ourselves on our trusted coverage of Politics, Business, Technology, and more.

Company

  • About Us
  • Newsroom Policies & Standards
  • Diversity & Inclusion
  • Careers
  • Media & Community Relations
  • WP Creative Group
  • Accessibility Statement

Contact

  • Contact Us
  • Contact Customer Care
  • Advertise
  • Licensing & Syndication
  • Request a Correction
  • Contact the Newsroom
  • Send a News Tip
  • Report a Vulnerability

Term of Use

  • Digital Products Terms of Sale
  • Terms of Service
  • Privacy Policy
  • Cookie Settings
  • Submissions & Discussion Policy
  • RSS Terms of Service
  • Ad Choices

© 2024 The Wall Street Publication. All Rights Reserved.

Welcome Back!

Sign in to your account

Lost your password?