Euro zone finance ministers broadly backed on Tuesday an idea that governments might apply for a precautionary credit line worth some 2% of their GDP from their ESM bailout fund to help them fight the economic impact of the coronavirus epidemic.

But the final decision on the use of money from the European Stabilisation Fund (ESM), which has 410 billion euros ($442 billion) of unused lending capacity, is to be taken only by EU leaders at their tele-summit on Thursday. The ministers agreed that the ESM credit, called the Enhanced Conditions Credit Line (ECCL), would be available to all euro zone countries, even though not all countries would have to apply for it, or draw from it.

Getting such a credit line would entitle governments to potentially unlimited European Central Bank bond buying, if the ECB were to decide it is needed. “There is broad support to consider a pandemic crisis support safeguard based on an existing ESM precautionary instrument, such as the Enhanced Conditions Credit Line (ECCL),” the chairman of euro zone finance ministers Mario Centeno said. (Reuters – Continue Reading)

WASHINGTON — President Trump says the country needs to reopen as soon as possible amid the deadly coronavirus pandemic — announcing he wants Americans back out and about by Easter on April 12. “I would love to have the country opened up and raring to go by Easter,” Trump said during a Fox News virtual town hall Tuesday afternoon, claiming the effect from a recession would be far more devastating than the virus itself.

“We have to put the country to work. You’re going to lose a number of people to the flu but you’re going to lose more people by putting the country into a massive recession,” he said. Trump has signaled his desire in recent days to have the country’s economy up and running as soon as possible as America approaches the end of a 15-day period of strict social distancing.

The president repeated previous comments that while the regular flu and automobile accidents kill tens of thousands of Americans each year, that didn’t lead to calls to “turn the economy off” or stop automobile production. (NY Post – Continue Reading)

A shrinking supply of Japanese government bonds is causing havoc in money markets as the Bank of Japan continues to buy and dealers refuse to sell. Rates in Japan’s repo market -- where bond holders connect with investors looking to borrow them -- hit a record Tuesday. The introduction of cheaper, more regular dollar-swap auctions has generated huge demand from U.S. currency-starved dealers who are keeping their JGBs to put them down as collateral.

“Demand for JGBs as collateral and its importance now is heightening.” said Souichi Takeyama, a rates strategist at SMBC Nikko Securities in Tokyo, in a telephone interview. “There is little incentive to sell to the BOJ because there are more effective ways to make use of JGBs.”

The surge in demand comes at a time when the Bank of Japan is stepping up its own JGB purchases, in its bid to provide liquidity to financial markets grappling with the worsening coronavirus outbreak. Net-net that means less supply available for Japanese banks who have so far tapped over $150 billion in ultra-cheap dollar funding. (Bloomberg – Continue Reading)