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[LONDON] Banks will take just 130 billion euros in the second tranche of new cheap loans from the European Central Bank on Thursday, according to a Reuters poll of euro money market traders.
While that would be far more than the 82.6 billion euros banks took at the first tender in September, it is less than the 150 billion euros traders had forecast for the second one just two weeks ago.
Taken together it means banks will only borrow just over half the amount on offer and may push the ECB to embark on full blown quantitative easing (QE) as it wants to expand its balance sheet by around one trillion euros.
"They will have to extend their purchasing program to some form of QE in order to expand their balance sheet," said a trader at a large dealer.
The balance sheet goal for the ECB is further thwarted by high bank repayments of the old crisis loans taken at the peak of the sovereign debt crisis in late 2011 and early 2012.
Banks are expected to repay 12 billion euros of the old crisis loans next week and although it is less than the 14 billion they will return this week, it is significantly higher than the average repayments over October and November.
At the weekly operation, the ECB will allot 100 billion euros to banks next week, versus 98 billion it allotted last time.