BOE Quantitative Easing In Disguise: ECTR


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(UK) The Bank of England confirmed it activated the Extended Collateral Term Repo (ECTR) lending facility with the first ECTR auction to take place on Wednesday, the 20th of June. The Bank will hold one ECTR auction per month until further notice at a minimum of £5B (min bid rate 25bps above the bank rate). Note, the ECTR was created (Dec) to provide liquidity to banks against a wide range of collateral.

How to interpret this headline?

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This is obviously another BOE Quantitative Easing, or stimulus without actually increasing its APT (Asset Purchasing Target).  The ECTR is likely going to help to electrify the market (ECTR stands also for electro shock therapy or something similar), as we saw huge response in the London Equity today.

The ECTR is meant for emergency liquidity facility to offer cheap six-month loans to U.K. banks in exchange for a wide range of collateral at only 25bps above the bank rate of 0.5% currently.  This could be in preparation for the upcoming Greek election, or just BOE’s way to deal with it’s struggling economy before the influx of cash expected from the Olympics…  At any rate, this may very well add a bit of bearish tone to the Sterling, but with the market becoming increasingly fatigued over news out of Europe, I would stay put and not necessarily sell off on the GBP just yet, expecially considering Greek elections and the potential for the market to go in either direction.

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About Henry Liu

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  1. […] UK, the Bank of England took steps to prepare the British banking system for more turmoil by activating the Extended Collateral Term Repo (ECTR) lending facility, which was set up late last year. The scheme will inject an estimated £80B into banks over time, […]

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