Target stability of a couple of trillion euros | EUROtoday

Wenn man dem Volksmund trauen darf, dann ist es eine eigentümliche Angewohnheit von Totgesagten, dass sie länger zu leben pflegen. So jedenfalls scheint es sich im Moment mit den außergewöhnlich großen Summen zu verhalten, die als Deutschlands „Target-Saldo“ bezeichnet werden. Dahinter stecken deutsche Forderungen aus dem europäischen System für grenzüberschreitenden Zahlungsverkehr zwischen Banken und Notenbanken, das eine Zeit lang „Target 2“ hieß und nach einer Umstellung nun einfach wieder „Target“ genannt wird.

Dieser Saldo lag per 30. September nach Zahlen der Bundesbank bei 1.073.511.585.763,02 Euro. Seit immerhin August 2020, also einem Monat mitten in der Pandemie, hält der Saldo sich damit hartnäckig oberhalb der Marke von einer Billion Euro. Abgesehen davon, dass dies schon eine recht große Zahl ist, ist auch die Entwicklung unerwartet.

Actually, according to the prevailing interpretation of these balances at the central banks, Germany’s target balance should have increased with the huge bond purchases of the Eurosystem, which includes the European Central Bank (ECB) and the national central banks. With the dismantling of these mountains of bonds, which began last year, the Target balance would have had to continually fall again.

The economists Caspar Helmus and Stefan Mitzlaff from the Bundesbank now address the question of why this doesn’t happen in an article for the Ifo express service. There has been a lot of back and forth discussion about how worrying these balances should be.

In any case, it should be noted that Germany’s balance has fallen again from more than 1.25 to 1.07 trillion euros since October 2022 – that was the time with high inflation. Recently, however, the balance has been stagnating or fluctuating a bit up and down.

“The central banks’ balance sheet reduction as part of the restrictive monetary policy has not yet led to a decline in German Target claims that is as uniform as the increase in the Target balance that occurred when the balance sheet was previously built up,” write the 2 authors Helmus and Mitzlaff.

In order to know why the stability ought to truly decline now, it’s important to delve a bit into the mechanisms of the system. In the trillion-dollar bond buy applications of the central banks since ECB President Mario Draghi, the consumers and sellers of bonds had been typically from totally different international locations. For instance, if a Spanish authorities bond was bought by the Spanish central financial institution, however the vendor was a global investor with an account in Frankfurt, this led to a stream of cash that influenced the goal stability – on this instance constructive for Germany, unfavorable for Spain.

But there have been additionally bond purchases by the ECB itself. Commercial banks don’t preserve accounts there. If a federal bond was bought by the ECB from an American business financial institution, cost was made, for instance, by way of an account on the Bundesbank. The bond was then discovered within the books of the ECB. The buy was financed by the respective nationwide central financial institution. The goal system acted as a balancing merchandise between the 2 central banks; The ECB then had a legal responsibility from the Target system to the nationwide central financial institution on its books.

If the central banks now let the bonds expire and do not exchange them, the reverse would truly need to occur. “An opposite effect would occur if the monetary policy securities portfolios were reduced if buyers used liquidity from the Bundesbank to buy securities abroad again. As a result, ceteris paribus, liquidity would flow out of Germany and the German Target balance would fall,” the authors write. But this isn’t noticed one-to-one as with bond purchases.

The authors converse of a “structural break” through the interval of rate of interest will increase on the finish of 2022. Until then, a change within the central banks’ bond portfolios by one euro led to a change within the German goal stability by 0.14 euros. After the structural break, this impact was diminished to only 0.03 euros.

Their central rationalization: With the rate of interest will increase, mechanisms within the bond market have modified. The authors point out three observations particularly that would have contributed to this: comparatively robust purchases of federal securities from different euro international locations; purchases from buyers exterior the euro space; and excessive home demand for presidency bonds in different euro international locations. The latter diminished the motivation for liquidity to stream from Germany to different international locations, which additionally counteracted a discount within the German goal stability.

The authors give an fascinating motive for the elevated home demand for presidency bonds in some international locations: “A likely driver for this extraordinary domestic demand, particularly from private households and other players without an account with a central bank, could be the slow passing on of interest rates by banks to their private individuals – and business customers.”

The Osnabrück economist Frank Westermann, who has intensively studied the Target balances, calls the article fascinating. However, he believes that, along with the bond buy applications, one should additionally have a look at the modifications within the ECB’s long-term loans to the banks, TLTRO, as figuring out components for the goal balances. Furthermore, he’s of the opinion that the discount of the central banks’ bond holdings will result in an extra discount within the Target balances – that may solely take time.