Building ABS’s big bazooka

Building ABS’s big bazooka

Will Caiger-Smith

June 05, 2014 10:00 PM

draghi cover — The president of the European Central Bank Mario Draghi listens to questions during a news conference in Frankfurt, Germany, Thursday, June 5, 2014. The European Central Bank has cut two key interest rates, one of them into negative territory a highly unusual step that underlines the urgency of its efforts to keep the eurozone economy from sliding into crippling deflation. It reduced its main interest rate, the refinancing rate, from a record low of 0.25 percent to 0.15 percent. More drastically, it also cut the rate it pays on money deposited by banks from zero to minus 0.1 percent, an unprecedented step for the ECB that aims to push banks to lend money rather than hoard it. (AP Photo/Michael Probst) | Michael Probst/AP/Press Association Images

The ECB’s announcement on Thursday that it will look into outright purchases of simple asset backed securities wasn’t exactly a big bazooka for Europe. But it was an important step and could be a defining point in the securitization market’s history. The bazooka might not have been built yet, let alone fired, but the ECB is at least designing it so that it will work properly.

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Will Caiger-Smith