Tag: quantitative easing

What is the ECB’s Corporate Bond purchase program?

What is the ECB’s Corporate Bond purchase program?

Financial Markets Explained
After the ECB ventured into the world of quantitative easing as a policy response to deflationary threats and lack of growth in the Eurozone, the markets are abuzz with the latest venture, known as corporate bond purchases starting June 8th. So what are corporate bond purchases how are corporate bond purchases different from regular bond purchases and what impact will it have on the Eurozone economy? This and more questions are answered in this article. ECB's QE - Timeline and Context The European Central bank, embarked on Quantitative Easing when it announced on January 2015 that the central bank would purchase sovereign bonds to stimulate growth in the European economies. While initially starting with a monthly bond purchase program of 60 billion euros, the ECB quickly ramped up their ...
How does the Federal Reserve’s QE Work

How does the Federal Reserve’s QE Work

Financial Markets Explained
Quantitative Easing, or Money Printing has been the most commonly used term among Central Banks across the world. Currently, the US Federal Reserve, Bank of England, to name a few engage in QE or asset purchase program in an effort to give their respective economies a boost. The US Federal Reserve for example has embarked on its latest QE since September 2012 promising to buy (and buying) MBS or Mortgage Backed Securities. While it might seem straight forward understanding how this QE(3) works gives investors and traders alike better insights into how the Federal Reserve aims to boost the economy. What is a Mortgage Backed Security MBS for short, falls under the derivatives market and works similar to that of Bonds, stocks or mutual funds. The MBS is a pool of Mortgages backed up by the ...
Why should you be paying attention to Central Banks

Why should you be paying attention to Central Banks

Financial Markets Explained
The Forex markets have seen a new entrant, the likes of the Central Bank now getting directly involved in their respective currencies. Being the largest institutional liquidity provider, the role of the Central Banks has become increasingly influential in the forex markets. If interest rate decisions was the primary tool, we are now in the age of direct market intervention in the likes of quantitative easing or asset purchase program. It is no wonder then that monitoring the policies of these large institutions, from a trader's perspective is imperative. Commonly referred to as currency wars, a case in point can be derived from the US Federal Reserve Bank, which (along with other Central Banks) started injecting money into the financial markets (QE). If earlier the Central bank minutes ...
Quantitative Easing Explained and how it works

Quantitative Easing Explained and how it works

Financial Markets Explained
Quantitative easing is a form of a monetary policy, often used by central banks in order to raise the money supplies during critical times when either the interest rates or interbank lending rates are close to zero. Such situations arise when there is either a low inflation or deflation. In such cases reducing the interest rates even further isn't enough to maintain the money supplies; thus quantative easing is used. When the Central banks cut the interest rates it is seen as an action to encourage lending. Lower interest rates are usually indicated by an increase in consumer spending. Over a period of time, Central banks do come face to face with a situation where they are not able to cut the interest rates any further, by making use of Quantitative easing, they (Central banks) inje