The ABS purchases which will include packaged Credit loans from banks including Residential (if I heard correctly , only existing, not new residential ABS will be purchased), other ABS that can be purchased includes existing and newly created. The market priced in and expected the ABS purchases as the ECB had hired Blackrock to advise on the purchase of ABS. The other asset being bought are Covered Bonds which are similar to Asset Backed Securities. Covered Bonds are usually backed by cash flow (say from mortgages) or public sector loans, they have recourse to assets and the issuer (the bond typically stays on the balance sheet of the issuer after sold) should the originator become insolvent. The program is assumed to be $500 bn Euros, but details on all of the above will be forthcoming at next month's ECB meeting on October 2.
The idea is to free up assets from balance sheets for new credit creation.
The net effect of this morning's surprise rate cut (traditional monetary policy) sent sovereign yields lower with most negative out to 2 years and Germany close to negative yields out to 4 years.
ES has been bouncing around since the 7:45 policy statement...
The EUR/USD dropped to 14 month lows below $1.30 before starting to stabilize around $1.30.
USD/JPY has been caught in a zone of wild chop, more or less a triangular shaped zig-zag up and down.
Gold ans silver gained a bit since the statement, but have pared back some of those gains.
US Treasury futures had gained after the policy announcement, but have since given up those gains.
IT looks like we'll be best served with our normal analysis as the market seems to be choppy after the ECB policy announcement, perhaps a lack of details, of course that excludes the Euro /EUR/USD which certainly moved.
I have all kinds of trade / watchlist alerts popping off so it's off to work.
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