Transport yourself back to July 26, 2012. Borrowing costs for the “peripheral” European nations are uncomfortably high. Ireland, Portugal and Greece were in the process of applying for bailouts, while the Spanish banking system was dangerously close to falling over. It wasn’t a question of when an EU member would leave the single currency bloc, but who? Step forward ECB President Mario Draghi, …Read the article
Having recently blogged about the potentially eligible universe of the Corporate Sector Purchase Programme (CSPP), we were naturally eager to find out which corporate bonds the European Central Bank (ECB) has actually been buying. On Monday, the ECB eventually published the highly-anticipated list of their bond holdings.
Except that’s not what happened. Instead of the ECB releasing a neat conso…Read the article
I attended a conference last week where European Central Bank (ECB) bashing was approaching fever pitch. The crux of the argument goes a little something like this:
“The ECB have lost the plot. Monetary policy has become impotent. The ECB is at the lower bound and the law of diminishing returns results only in an ever greater misallocation of resources, punishing savers and rewarding speculatio…Read the article
Bond markets have reacted strongly to the 10th March announcement by the European Central Bank (ECB) of its new corporate sector purchase programme (CSPP). Credit spreads of euro-denominated investment grade (IG) corporate bonds have tightened by around 20 bps on average. Still, a lot of the CSPP’s particulars are anybody’s guess at this point. The publication of the account of the last monetar…Read the article
The simple answer is a no. Eric Lonergan in a guest blog has already (see here) debunked the idea that central banks are at the zero bound. And since then the market has become increasingly confident that the ECB will cut its deposit rate further into negative territory at tomorrow’s meeting. And it has reason to do so. Inflation and growth will be lower than the Bank had forecast a mere three …Read the article
Ahead of tomorrow’s ECB monetary policy meeting, the market has high expectations of rates being cut further into negative territory (consensus is a cut in the deposit rate by 10 to 20 bps). However, a report this week from the Bank for International Settlements (BIS) suggests that cutting rates further could be counterproductive and damaging for the banking sector.
The BIS’s quarterly review,…Read the article
It’s pretty clear that the pressure is on the European Central Bank (ECB) to come up with some form of policy response at their next Governing Council meeting in March. Take, for example, the 5-year, 5-year EUR inflation swap rate (i.e., the swap market’s estimate of where 5-year inflation rates might be in five years’ time), which has taken a nose dive to 1.5% (see chart below). This is remark…Read the article
Expectations are high that European Central Bank (ECB) president Mario Draghi will announce additional easing measures at the next monetary policy meeting on Thursday this week. If the ECB decides to provide further stimulus via extended (or expanded) QE and/or lowers its negative deposit rate further, the Swiss National Bank (SNB) has some thinking to do. I am probably not the only Swiss perso…Read the article
Economic policy hawks love inflation expectation surveys. As do bond fund managers, who like to keep a close eye on inflation to ensure that fixed income returns aren’t being eroded away. Provided that inflation expectations are close to target, we tend to argue expectations are well anchored and thus central bankers can rest easy. However, the monetary policy actions undertaken by many central…Read the article
Picture the scene: a meeting room, 40 floors up, plate glass floor-to-ceiling windows with views of central London in the background. At the polished mahogany table sits Hans Schmidt, the CFO of a major consumer global goods company. In walks Chad “Ace” Jefferson III, the latest in a long line of investment bankers assigned to cover his company. Behind Chad follows an entourage of five impeccab…Read the article