First look at ECB PEPP debt-buying shows massive support for CP

European Central Bank headquarters, Frankfurt

Markets got their first glimpse on Tuesday, June 2, of just what the European Central Bank has been so busy buying in its Pandemic Emergency Purchase Programme (PEPP), a €750 billion scheme set up by the ECB in March to help maintain monetary policy transmission in the face of the economic chaos caused by government responses to the coronavirus pandemic.

While most purchases so far are of sovereign debt, as expected, the striking finding is that most of the private sector debt that the bank bought – some 76% of the €46 billion total in that segment  – was in the commercial paper (CP) market.

Within that, some 81% – a total of €28.7 billion – was primary issuance.

ECB graph1

It was in CP where some of the earliest corporate funding pain was felt as liquidity began to dry up in the middle of March, a factor that led to companies quickly drawing on their bank lines to refinance paper that could not be rolled over, as well as to provide additional working capital.

That pressure began to ease as stimulus measures kicked in  – including the ECB’s PEPP, which expanded on existing measures like the asset purchase programme (APP) and the corporate sector purchase programme (CSPP).

The PEPP waived previous eligibility requirements to allow

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Coronavirus: IFC fires out $8 billion fast-track financing – for starters

On the frontline of the fight against Covid-19, the International Finance Corporation (IFC) is working against the clock to ensure jobs and businesses are kept afloat as developing countries face one of the worst healthcare and economic crises in history.

Sérgio Pimenta, IFC’s vice president for the Middle East and Africa, tells Euromoney via video link from Washington that the IFC’s first priority is to ensure the rapid disbursement of its $8 billion fast-track financing package to 300 of its existing clients that most need support.

“The goal of the $8 billion financing is really to help companies going through this difficult time and to preserve jobs,” he says.

The IFC’s response has four components, with $2 billion allocated to four separate response facilities, which range from direct funding via loans and equity investments to vulnerable companies, to trade finance support and working capital for emerging market banks.

Immediate focus

The immediate focus is to help existing clients, says Pimenta, because they are in a better position to absorb the financing.

In the health sector for example, the IFC’s facilities will cover clinics, medical equipment and pharmaceutical companies, helping to meet the need for additional equipment globally and ensuring supply chains are functioning.

“Whether masks or ventilators, a lot of this supply comes from China, so it is important

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Coronavirus: Dividend futures – the Nostradamus trade

Most European banks have indicated that they will suspend dividend payments after the Bank of England followed the European Central Bank in discouraging payouts to shareholders while the coronavirus crisis rages.

The list of non-bank companies suspending their dividends is also growing, with Goldman Sachs predicting a 25% fall in payouts by S&P 500 index members this year – a forecast that balances payments already made with a 38% fall for the last nine months of 2020.

Other analysts expect a fall in dividend payments from European companies that may be close to a decline in earnings of around 50%.

Global dividend payments rose by 3.5% last year to a record total of the equivalent of $1.43 trillion, according to a study released by Janus Henderson in February, which noted that underlying growth compared with 2018 was 5.4% before allowing for the effect of strength in the US dollar.

The US accounted for the biggest proportion of this, with dividend payouts of $490.8 billion. Dividends from European companies ex-UK were down slightly in dollar terms at $251.4 billion, but after adjusting for exchange rate movements underlying growth was at 3.8%.

Janus Henderson pointed out that expectations for company earnings growth were modest but felt confident enough to assert that: “2020 is set to deliver the fifth consecutive year of

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What’s wrong with ESG ratings?

According to Jay Clayton, chairman of the US Securities and Exchange Commission, they are “over-inclusive and imprecise.” Researchers at MIT Sloan characterized their effect as “aggregate confusion.” And on a recent Euromoney podcast, Peter Bakker of the World Business Council for Sustainable Development described them as “a bit of a zoo”.

These days, it can seem as though no one has a good word to say for environmental, social and governance (ESG) ratings. Are they really so unfit for purpose? And if so, why are investors still using them?

One of the main criticisms levelled at the industry is the wide divergence of ratings on offer from different providers. The MIT Sloan study, published last year, found that the average correlation between ESG ratings from six leading providers was 0.61. The researchers contrasted this with the 0.92 correlation between credit ratings provided by Moody’s and Standard & Poor’s.

This has been widely cited as evidence that ESG ratings are unfit for purpose – but such criticism misses the point in several respects.


For one thing, there is the question of whether it makes any sense to invite comparisons between credit ratings and their ESG counterparts. All credit ratings, irrespective of provider, attempt to provide an answer to one simple question – what is the probability of default on

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Wirecard shows risks of fashionable fintech

Short-sellers are reaping more than financial rewards from a multi-billion euro accounting fraud at German payments processing firm Wirecard. 

Among other measures to defend the now-stricken firm, German financial regulator BaFin temporarily banned shorting its shares in 2019. Now the short-sellers have taken the moral high ground – despite Europe’s recent Covid-19 shorting bans – as Wirecard’s downfall has left former chief executive Markus Braun subject to a criminal investigation.


Markus Braun, Wirecard 

Fraser Perring is one of the short-sellers who did most to publicize doubts about Wirecard’s accounting, initially sparking a sharp selloff in Wirecard shares in 2016, following disclosures by Zatarra Research and Investigations. 

Perring now feels not just vindicated, but angry about BaFin’s market-manipulation complaints that were made against him in connection with Wirecard. He says that this was settled out of court this spring, for a “relatively small” sum.

A former social worker in the English midlands, Perring is perhaps the ideal character for an activist short-seller. He naturally distrusts the capitalist establishment and relishes taking down its members. 

His passion and air of amateurism sometimes makes him sound like a conspiracy theorist – he talks of freemasonry and the like – and attracts, at least, accusations of recklessness.

Yet Wirecard is Perring’s second big victory, after his report on Steinhoff International Holdings – then under

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Adapt and thrive: how FX algos are coping with volatility


Paul Golden

Published on:

FX trading algorithms are getting smarter at dealing with crises – and getting more popular as a result.

forex analysis 780

A few weeks is a long time in a volatile foreign exchange market. 

At the end of March, Greenwich Associates published a report entitled ‘Digitization delayed: why algos aren’t more popular in FX’, based on data collected before markets felt the impact of Covid-19

It found that only 37% of FX market participants surveyed used algorithms – and just 22% of their volume was traded algorithmically.

Fast forward to late April, and JPMorgan’s FX e-commerce team was telling clients of a big increase in volumes of algos for tickets with a notional value above $10 million, with 60% of these orders traded algorithmically in March.

Jill Sigelbaum,

Buy-side traders working largely from home while coping with a significant increase in the number of trades to execute have turned to algos so they can focus on more time-consuming, less liquid and complex trades.

Jill Sigelbaum, head of FXall, notes that algo trading volumes on that platform increased by 380% in March compared to the same period last year, with the bulk of the increase attributable to asset management clients.

“We were

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