PARIS (MNI) – Analysts who listened to ECB President Jean-Claude
Trichet were divided over his performance, with some saying the central
bank played it just right and others expressing disappointment that it
did not announce a major new bond buying offensive to quell market
insurgency.

But it did not go unnoticed, at least by some, that if Trichet
declined to say anything specific about the ECB’s bond buying plans, the
central bank appeared to be in the market buying aggressively even as
the ECB chief was busy dodging questions about it.

Some said Trichet’s words, though vague, left the door open for the
ECB to ratchet up its bond buying program. Others said the markets,
despite today’s good cheer, will end up being disappointed by today’s
performance.

Excerpts of analysts’ comments are below:

CARSTEN BRZESKI, ING: “Today, all eyes were on the ECB’s answers to
the current turmoil on government bond markets. The Irish bailout on
Sunday and the announced details of the new European Stability Mechanism
had failed to calm bond markets. For some market participants, the ECB
was now seen as the lender of last resort for the Eurozone which should
use its full arsenal to calm markets. But the ECB did not. The ECB chose
a compromise and extended its full allotment procedure but did not
announce any changes to the bond purchasing programme, while still
confirming that it will continue without any given limit. The weekly,
monthly and 3-month refinancing operations will be conducted as
fixed-rate tender and full allotment procedures at least until the end
of the first quarter. The sovereign debt crisis has once again delayed
the ECB’s exit strategy.”

HOWARD ARCHER, IHS Global Insight: “Significantly and really
inevitably given the still high dependence on ECB funding by banks in
the more vulnerable Eurozone countries, the ECB called a halt on its
recent plans to gradually phase out its emergency liquidity measures and
announced that it would extend all of the current measures through to at
least April. One-week, one-month and three-month funding operations will
be continued with full allotment and fixed interest rates…The ECB’s
extension of its emergency liquidity measures will help matters, but it
is really the minimum of what was expected or hoped for by the markets
so is unlikely to markedly ease tensions. At least though, the ECB has
left the door open to steeping up its bond purchases markedly.”

JUERGEN MICHELS, Citigroup: “Although the ECB extended its
liquidity measures, the ECB disappointed escalating market expectations
of an announcement regarding a significant rise in the SMP. Hence, as we
expected, the ECB has not taken a lead role in providing funding to the
fiscally strained periphery countries. This leaves it unclear whether
there will be sufficient emergency funding for periphery countries, and
this uncertainty is likely to lead to additional pressure on periphery
markets. In case of a severe adverse market development in coming days
— as in early May — the euro area finance ministers would probably
come up with additional measures (there is a regular meeting next Monday
or they could hold an emergency meeting). In that case, we expect that
the ECB would probably choose to increase its support.”

CEDRIC THELLIER, Natixis: “Trichet merely said the bond-buying
program would continue and, when asked, declined to give a target. The
markets were no doubt a bit disappointed, but they had also built up
false hopes. One mustn’t believe that the ECB is there to bring a
miracle solution. I think that if Trichet had specified a target, this
would only have encouraged speculation. I suspect we will see a slight
acceleration in bond purchases compared to the previous four weeks.
Trichet seems to be trying to bring as much reason as possible to
irrational markets, by reminding that the overall situation of public
finances in the Eurozone is far better than in the U.S. or Japan for
this year and next year. He also noted that the real economy has
continuously surprised to the upside, suggesting one should see the
glass half full rather than constantly half empty.”

MICHAEL SCHUBERT, Commerzbank: “The further postponement of the
exit supports our view that contrary to current consensus expectation
the ECB will not raise rates in 2011. The next exit step can be
implemented no earlier than in spring this year. Since it was always the
ECB’s aim to ensure smooth conditions in the money market, the phasing
out will be a gradual process, i.e. it will be time consuming. At the
same time, we think that the ECB will probably roll back its nonstandard
measures before interest rates are increased again, although the bank
always highlighted that all options were open with regard to the order
in which the ECB would unwind its monetary measures. However, supplying
extra liquidity to the markets through non-standard measures while, at
the same time, tightening monetary policy would send mixed signals on
the effective monetary policy stance, since measures to alleviate the
strains in money markets could in fact be seen as a continued easing of
the monetary policy stance.”

JONATHAN LOYNES, Capital Economics: “I guess the key thing is
they’re going to extend their provision of short-term loans for another
three months, which is a positive. But a negative is there wasn’t a
bigger commitment to more bond purchases. I think that is something the
market had possibly hoped for. Now the disappointment seems to have been
offset by reports that the ECB has been buying bonds. Nonetheless, I
think the lack of a commitment to purchase a particular amount over a
particular timescale is possibly a bit of a disappointment and obviously
contrasts strongly with the bond purchases made by the Bank of England
or the Federal Reserve who announce amounts. The ECB has done the bare
minimum. I think, in time, that markets may come to view this as
slightly disappointing.”

MARCO VALLI, Unicredit: “The ECB decided…to err on the side of
caution, and I think this is wise, given the current market
environment….There was no ‘shock and awe’ announcement on bond
purchases, with absolutely no numerical target for potential buying, in
line with our expectations. Trichet sounded non-committal on the
purchase front, limiting himself to state that the program is ongoing
and the ECB remains permanently alert. Our feeling is that the bar for
them to consider a large-scale intervention in the market is quite high.
However, even if market conditions forced them to move in this
direction, we doubt that they will ever come up with an official
purchase target.”

CHRISTEL ARANDA-HASSEL: “I think that in usual style they did not
want to commit, but left all doors open. In effect he told us to watch
the numbers. Reportedly they are in the market, they were certainly in
the market whilst he was speaking. He ultimately missed an opportunity
to calm things down a little bit more. We are left to figure out if they
really mean business by watching them and scrutinize it on Monday when
they release the numbers. Clearly the Monday after, it will be really
scrutinized to see if they have stepped things up. If they have, fine,
it will calm things down. If they haven’t, I think spreads will widen
again.”

TOM VOSA, National Australia Bank: “Trichet failed to talk about
ECB bond purchases of sovereign debt. In answer to questions by
journalists he stated that bond purchases would continue to be fully
sterilized (in line with ECB statutes which prohibit the monetisation of
government debt), but gave no signal that the ECB was looking to
significantly expand its current purchases. This seems to have
disappointed the market, but we would have been surprised had Trichet
come out with any explicit support for sovereigns at the moment. For one
thing, it avoids having to answer whether Spain and Italy are now
counted as peripheral debt, potentially increasing pressure on those
debt markets and it also avoids dragging the ECB into eurozone fiscal
policy. So rates in the eurozone are on hold for the time being as
governments grapple with restructuring their finances. The plan seems to
be to provide enough liquidity to the banking system to ensure that
sovereigns are not asked to backstop them for now and hope that the
usual muddling through solution for Europe works once again.”

NICK MATTHEWS, Royal Bank of Scotland: “I think we got as much as
we were expecting from Trichet in terms of the ECB’s commitment to its
bond purchases. There was a clear message that the program is ongoing
and the ECB are going to be implementing its non-standard measures
commensurate with the extent of market disruption. At the same time, we
had Trichet emphasizing that the ECB is constantly alert and noted acute
tensions. There was also a suggestion that some decision had been made
on the SMP, because Trichet said that there was an “overwhelming
majority” in that decision. He did not specify [what decision had been
taken], but I think that reading between the lines, it does suggest that
the ECB is opening up to more bond purchases, which we had been
expecting.”

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