ECB will benefit from US Fed's QE experience

The European Central Bank can benefit from its US counterpart's solid track record with quantitative easing as it launches a similar programme next month, a prominent fund manager said.
"Sometimes going second has its advantages," Brian Jacobsen, strategist for Wells Fargo Asset Management, told AFP in an interview. "The ECB has learned a lot from having the Fed go first."
Noting that the United States did not see a surge in inflation as a result of QE, he said "maybe the public can be a bit more confident that the ECB's programme won't lead to runaway inflation."
The ECB in January unveiled a programme to buy 60 billion euros ($68 billion) of private and public bonds each month starting in March, a move intended to ward off deflation in the eurozone.
Asked how the eurozone bond market was preparing for the injection, Jacobsen said: "Investors have gobbled up sovereign debt in the wake of the (January 22) announcement.
"The big effect of QE is in the announcement, not necessarily the implementation. In the US, bond yields started to rise after the Fed began purchasing bonds, but yields fell after the announcement."
He said the ECB plan was "about on par" with the third round of QE in the United States, "after adjusting for the relative sizes of the economies."
Jacobsen dismissed fears that the plan would cause the bond market to dry up, saying: "There's over 6.7 trillion euros worth of sovereign debt outstanding. The ECB may buy just over 15 percent of (it). There's also new debt being issued all the time."
Asked about plunging bond yields, Jacobsen said: "It's not just the ECB that's driving down yields. Banks and insurance companies are required to hold sovereign debt, making them captive buyers.
"There's also the fear trade pushing people into sovereign debt where it's perceived as being better to get a known pittance of a return rather than a more generous but more speculative return."
Jacobsen played down the possible impact on the ECB's plan of moves by the Federal Reserve, saying: "What really matters is whether the Fed does what's expected or not. It's only if the Fed hikes rates sooner or later than expected, or by less or more than expected, that would move markets."
He added: "Perversely, if the Fed hints at being more dovish, that could stop the euro's slide against the dollar" and affect the practice of borrowing in Europe in order to buy US Treasury bonds.
"Strangely, a dovish Fed -- which you'd expect to push rates lower -- could actually push them higher."