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Changing collateral

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  • Greek bonds will not be accepted as collateral at the ECB. Greek banks will still be able to obtain liquidity (at a price). The viability of monetary unions tends to depend on their banking systems, so the ECB's policy shift could be seen as a high stakes game.
  • The Peoples' Bank of China changed its reserve requirement ratio, finally (it has been expected for some time). The issue seems to be a desire to stabilise liquidity, which has been suffering from capital outflows, more than creating credit.
  • Newswires report that Toyota is considering using some of its cash to increase payments to suppliers. This is critical as for Abenomics to succeed the profit consequences of a weaker yen need to be spent in the economy (one way or another). The need to translate profit into growth also applies in the Euro area.
  • The US has trade data (showing the net benefit of a lower oil price) and productivity and unit labour cost figures. Unit labour costs are around two thirds of the consumer price inflation basket, and we are above consensus with a forecast of 2.6%.