BlackRock Appointed as ECB Consultant for ABS-Purchase Plan
Comment of the Day

August 27 2014

Commentary by Eoin Treacy

BlackRock Appointed as ECB Consultant for ABS-Purchase Plan

This article by Paul Gordon for Bloomberg may be of interest to subscribers. Here is a section: 

The ECB contract requires BlackRock to ensure effective separation between its project team working for the central bank and its staff involved in any other ABS-related activities, the ECB spokesman said. External audits related to the management of conflicts of interest will also be made available.

The company, headed by Chief Executive Officer Laurence D. Fink, has more than $4 trillion of assets under management. It is among the largest investors in European ABS, with portfolios spanning debt backed by commercial mortgages to auto loans, according to data compiled by Bloomberg.

The final decision on the design and implementation of any ABS-purchase program will be taken by the ECB’s Governing Council, and the execution will remain the responsibility of the central bank, the spokesman said.

Eoin Treacy's view

In much the same way that the Fed has been an active participant in the market for Mortgage Backed Securities (MBS), Mario Draghi made clear that the ECB is exploring options for revitalising the European asset backed market in an effort to inject liquidity into the domestic Eurozone financial sector. This is no small task since the market remains illiquid and issuance has been tepid. Appointing Blackrock as a counterparty is a first step towards what could potentially be a fully- fledged Eurozone quantitative easing program. 

The Euro continues to trend lower and while it is becoming increasingly oversold relative to the 200-day MA, a sustained move above $1.35 will be required to question medium-term scope for a further test of underlying trading. 

Blackrock Inc., in common with the asset management industry more generally, has been outperforming the wider financial sector by a considerable margin since 2008. The share broke out of a five-year range last year and has found support in the region of the 200-day MA on successive occasions since. It has rallied impressively over the last three weeks to hit another new high and a sustained move below $300 would be required to question the consistency of the medium-term uptrend. 


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