ECB imposes negative interest rates

[Jason101]

This ECB move is such an extraordinary event that it could have longer term consequences for trends in some markets.
For example maybe some obscure real estate ETF?
What are your thoughts?

 

[Peter Anderson]

This ECB move is such an extraordinary event that it could have longer term consequences for trends in some markets.
For example maybe some obscure real estate ETF?
What are your thoughts?

Hi Jason,

The ECB move is unprecedented for the European Central Bank, however it is not an unheard of move globally. Both Denmark and Sweden have trialled negative deposit rates in recent history. Those economies might be a good place to look if you were interested in the effects the policies may have.

One thing to keep in mind is that the negative deposit rate only applies to excess liquidity - such as excess reserves which financial institutions deposit at the ECB overnight. The effectiveness of the policy may depend on how much excess liquidity is in the system, and can change with any new policy that affects this balance (Such as a European version of QE).

It is also probably important to note that the deposit rate being discussed here is not the rate that savers receive in their bank accounts.

 

[robertd16]

Another thing to keep in mind is that although a negative nominal rate is quite rare, negative real interest rates are less so.

The yield to maturity on the 5-year Treasury note has been below 2 percent since July 2010, and the yield to maturity on the 10-year Treasury note has been below 2 percent since May 2012. Yet, looking forward, the Federal Open Market Committee in January 2012 announced an inflation target of 2 percent—implying an anticipated negative real yield over the life of the securities. Investors, facing uncertainty, appear willing to pay the U.S. government—when measured in real, ex post inflation-adjusted dollars—for the privilege of owning Treasury securities.

Source: https://www.stlouisfed.org/publications/re/articles/?id=2316

 

[Npard23]

This won't solve any of Europe's economic problems. Europe is in decline due to social decay and a fundamental lack of competitiveness. The EU chose social harmony and equality over growth and are paying the price with a stagnant society. It will take a radical shift in European nation's attitude toward work, the role of the state, and cynicism before we see real growth (however, the ECB may be successful in its attempts of inflation).

I go into further details on Europe's structural limitations here.
http://macrotalkpodcast.com

As for trades I like the pair trade of going long an emerging EU country such as Poland (EPOL) and shorting two of the weaker peripherals for a net short positions (Italy and France are the weakest in my opinion and the best short targets).

 

[closer]

This won't solve any of Europe's economic problems. Europe is in decline due to social decay and a fundamental lack of competitiveness. The EU chose social harmony and equality over growth and are paying the price with a stagnant society. It will take a radical shift in European nation's attitude toward work, the role of the state, and cynicism before we see real growth (however, the ECB may be successful in its attempts of inflation).

I go into further details on Europe's structural limitations here.
http://macrotalkpodcast.com

As for trades I like the pair trade of going long an emerging EU country such as Poland (EPOL) and shorting two of the weaker peripherals for a net short positions (Italy and France are the weakest in my opinion and the best short targets).

http://static2.trade2win.com/boards/images/smilies/icon_frown.gif

To explain the decline ,We can add the use of the euro in the EU where income tax legislation , industry competitivity, minimum salary are differents.

 

[manateerex]

All it was in the news recently was for it's denial to Greece for the further loans.