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Draghi: don’t count on another carry trade

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Draghi: don’t count on another carry trade

The steady stream of money from the European Central Bank is drying up. Banks will no longer be able to engage in trade of sovereign debt with cheap cash to gain huge profits. Yesterday, in a testimony to the European Parliament in Strasbourg, France, the President of the ECB, Mario Draghi, said that “The convenience to use the ECB cheap money to buy government bonds is much less. The general situation is such that these carry trades are going to be much less profitable.”

Government debt moving to Italy from Spain is now providing record low yields, whereas two years ago, it was much more lucrative, Draghi pointed out. That said, the Frankfurt-based ECB could extend as much as 1 trillion euros ($1.36 trillion) in its so-called TLTRO program starting in September. This liquidity drive would see cash pinned to banks’ performance in extending loans to the economy.

A condition of the TLTRO program stipulates that banks must meet a benchmark on lending to businesses and households, excluding mortgages, or else they will have to return the money in 2016. “If banks don’t lend to the non-financial private sector, they’ll have to repay,” Draghi confirmed.

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6th Floor, ABSA house,
Ebene Cybercity,
Mauritius,
J. Balcikonio str. 9,
LT- 08314, Vilnius,
Lithuania,

media contact

About

deVere Group – Foreign Exchange’s Public Relations Department deals with all areas of the media and external communications including international, national, regional, local, trade, consumer, print, broadcast, social and online. The Department aims to provide a helpful service to journalists, broadcasters and editors, amongst others, and reply to all media enquiries, including urgent enquiries out of hours, within agreed deadlines.

Contact

Our press office does not have access to client details and will not be able to assist with individual client enquiries. Please contact deVere Group – Foreign Exchange’s Head of Public Relations on [email protected] or call +44 2071220925.