Goldman Sachs Sees ECB Transparency Risks Beyond Coeure Speech

It’s not just with the publication of speeches that the European Central Bank risks stirring up market volatility, according to Goldman Sachs Group Inc.

The ECB’s quantitative-easing program may be creating distortions because price inquiries are only made to selected dealers and a summary of purchases is published just once a month, Francesco Garzarelli, co-head of macro and markets research at Goldman Sachs in London, wrote in a client note.

The central bank is under the spotlight after Executive Board member Benoit Coeure told an audience that included bankers and hedge-fund managers on Monday of changes in the pace of ECB bond purchases. The speech was only widely distributed the next morning, when it prompted the euro to tumble and bonds across the region to jump.

“That a change in the modalities of the ECB’s program was relegated to a speech rather than an ad hoc formal communique by the ECB has created confusion in markets,” Garzarelli wrote. “Coeure’s claim that the ECB’s aim is not to impair ‘price discovery’ is one that deserves more discussion.”

The ECB said in a statement that the intention had been to release Coeure’s remarks on Monday as he spoke, and that a procedural error prevented that happening until Tuesday morning. It also said the speech was covered by Chatham House Rule, meaning it wouldn’t normally be published.

Similar QE programs elsewhere have disclosed information differently to the ECB. They used “reverse auctions” and revealed the bonds that were bought and the prices paid “shortly after the transactions,” Goldman Sachs’s Garzarelli wrote.