In his distinctively dovish Sintra speech two weeks ago Mario Draghi left the door wide open for further loosening of monetary policy in the Euro area. All options seem to be on the table to bolster European inflation numbers, including a new round of quantitative easing. Draghi’s remark about the ECB’s Asset Purchase Programme (APP) still having considerable headroom fuelled hopes amongst ma…Read the article
This week the 10-year German bund yield hit a new record low of -0.33% in the wake of Draghi’s Sintra speech which had echoes of his 2012 “whatever it takes” declaration. Why so dovish? Manufacturing data from the eurozone has been universally bad lately, and inflation expectations are collapsing. The core inflation rate is now just 0.8% and the ECB’s 2% target looks an impossible goal. The mar…Read the article
German government bonds have gone from strength to strength in recent times; much like the German team at the World Cup – I wish! But is the latest Bund rally sustainable? I think not.
Let’s start with the bull case. In a recent blog, I described how Bunds had provided an efficient hedge against surging political uncertainty in Italy, due to the negative correlation between yields on German and…Read the article
Back in 2017, the economic outlook was increasingly rosy for the Eurozone. After years of ultra-loose monetary policy, a synchronised global recovery was in train. The Eurozone economy expanded apace, regularly surprising to the upside, unemployment continued to fall, the banking system had partially recapitalised and funding costs for corporates and sovereigns alike remained low on any measure…Read the article
Credit risk is real. It’s easy to forget this platitude in times when both investment grade and high yield credit markets go from strength to strength. Even one of Europe’s foremost credit investors – the European Central Bank (ECB) – has recently been reminded that there is indeed the risk of permanent loss of capital when buying corporate bonds.
Every week the ECB updates the consolidated lis…Read the article
While the market gears up for the much anticipated European Central Bank meeting on Thursday, there are two other European central banks due to meet earlier in the day; Sweden and Norway.
I was in Washington a couple of weeks ago for the World Bank and IMF conferences, which was a great opportunity to hear from policy makers and economists. It served as a timely reminder that the European centr…Read the article
European investment grade (IG) corporate bond spreads are now more than 40 basis points tighter than in early March 2016, before the European Central Bank (ECB) announced the expansion of its quantitative easing programme into the € IG corporate bond space. The technical tailwind provided by monthly bond purchases to the tune of around €7.5 billion from June onwards under the ECB’s corporate se…Read the article