ECB eases rates on TLTROs, will support money markets

Rate-setters in the euro area unexpectedly eased their policy settings further at Thursday's meeting but did not expressly reiterate in its policy statement that its pandemic emergency bond purchase programme, known by the acronym PEPP, might be further increased in size.

Almost all economists were anticipating an increase in PEPP to support debt issuance by euro area governments, albeit not until the European Central Bank's June policy meeting at the earliest.

Ahead of ECB chief Christine Lagarde's presser at 1330 GMT, the immediate reaction in share prices across the Continent was a slight dip further into negative territory.

To take note of, markets were wrong-footed the last time around by remarks from Lagarde suggesting that the ECB might take a more 'laissez faire' approach to the rise in periphery bond yields, so traders were a bit queasy ahead of her press conference.

The ECB kept all its main interest rates unchanged, as expected by analysts, but lowered the interest rate that it would charge on its third round of so-called Targeted Long Term Refinance Operations between June 2020 to June 2021 to 50 basis points below the average level on its main policy rate, now at 0.0%.

And for lenders who met the ECB's net lending targets, the TLTRO III interest rate would be 50 basis points below that on the deposit facility, which was at -0.50% at the time of the announcement.

Policymakers did however unveil a new instrument labelled "non-targeted pandemic emergency longer-term refinancing operations (PELTROs)" to support money markets.

Meanwhile, for the moment at least, the amount of PEPP was kept at €750bn and the ECB said that it was expected to run until the coronavirus crisis was over and in any case until the end of 2020.