Report
Should it be accepted that the ECB generates distortions in financial asset prices?
The ECB has already generated many distortions between financial asset prices: It buys bonds and not equities; It buys public-sector and Investment Grade corporate bonds, but not High Yield corporate bonds. A new distortion will appear if the ECB decides to buy (refinance) "green" bonds on more favourable terms than "brown" bonds. At first sight, distortions between asset prices that do not result from the fundamental values of the assets or from the risk linked to holding different asset classes are negative and worsen the quality of the information provided by financial markets. But the only case where these distortions are acceptable is when they correct an externality: this is not the case for the ECB’s usual policy (penalising equities and High Yield is, on the contrary, inefficient), and this is the case for green bonds, which it is legitimate to favour.
Provider
Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
Other Reports from Natixis
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.