The ECB Will Prefer To Be Safe Rather Than Sorry

The ECB’s main priority will be to fuel confidence in the financial markets and inflation will be its alibi for this. In February, eurozone CPI receded to -0.2% year-on-year and, in the short term, the region should be prepared for negative rates to continue.

The Refugee Crisis And The Beast Within

Nick Malkoutzis via Macropolis | As symbols go, the imaginary pig’s head in William Golding’s Lord of the Flies requires little explanation. Its meaning is summed up in one line of the unnerving classic. “Fancy thinking the beast was something you could hunt and kill!” says the fly-infested head. “You knew, didn’t you? I’m part of you?”

A ‘Brexit’ Map for Sterling

UBS | A date for referendum is set and the pound is getting pounded. The United Kingdom reached an agreement with the European Union and the UK announced that the referendum vote will take place on 23 June 2016.

Consumer spending in Spain outpaces eurozone

The figures issued by the Bank of Spain have confirmed what we could already see with the naked eye; namely that Spaniards are losing their fear of the future and spending again. After several years of austerity, the consumers in Spain have gradually loosened their purse strings over the past year. And to such an extent that consumer spending rose 3.1% in 2015, almost tripling the 1.2% registered a year earlier.

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What if we were to see deflation?

ZURICH | UBS analysts | Our central case is that we will not have deflation in any country except for Spain in 2015. But we cannot rule out the possibility of deflation, so here we look at assets that may outperform during periods of deflation. Generally deflation is bad for equity which de-rates aggressively but the story is more nuanced because particular sectors and styles are affected quite differently.

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EU Banks: Surprises for 2015

MADRID | The Corner | The ECB’s non-conventional measures, the banking restructuration and the adaptation to the new regulation make 2015 a crucial year. According to experts at Morgan Stanley, the many stories about restructuration, dividends and regulatory changes will allow to differentiate the performance of the different assets.

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EU: Dumbing it all down

ZURICH | UBS analysts | Corporate bond markets in Europe have been quite resilient through these past few sessions in both IG and HY, offering relatively good outperformance. It would appear it is increasingly becoming a case of just buy it (corporate bonds), because that’s what’s best. Don’t worry, one will be looked after – the ‘structure’ after all is in place. There may be no growth, but you are promised low interest rates (zero at the front end), low funding yields (lowest ever, iBoxx corporate bond yields at 1.4%), a low default rate (less than 3%) and your money back at maturity.

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Draghi in drag

SAO PAULO | By Marcus Nunes via Historinhas | The European Central Bank opened the door to a dramatic escalation in its campaign to stimulate the eurozone’s stagnant economy early next year, signaling a new chapter in the bank’s fight against excessively weak inflation in the heart of Europe. ECB President Mario Draghi said after the bank’s monthly meeting that officials discussed purchases of government bonds, known as quantitative easing or QE, but that they needed more time to gauge the effects of policies that they have already implemented while assessing how falling oil prices may affect the bank’s consumer-price outlook.

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EU: Triple-Bs? Yes please!

By Suki Mann and Thibault Colle (UBS) | We effectively have four-weeks of business left in 2014 and the path is clear for corporate bond markets to record some more upside in performance. That isn’t as welcome as it might at first look. Because we do actually need something for next year. We’re already sitting on excellent returns for 2014 of 7.7% in IG and 5.6% in HY; and with that, record low yields in IG (1.42%) and spread levels not seen since before the crisis (iBoxx IG at B+101bp). Supply in HY is at a record level (€72bn YTD) and we now have the second best year for issuance ever in IG non-financials (€201.6bn) after Tuesday’s deals from BskyB and RCI are accounted for.

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ECB has some Aces up its sleeve yet, but what about Draghi?

MADRID | The Corner | According to CMC Markets’ analysts, “none of this week’s data from Europe has done anything to persuade markets that the European Central Bank won’t ultimately be forced into taking further action to help boost economic growth in the euro area at some point in the next few months.” Be that as it may, the Governing Council of the ECB will meet on Thursday to keep on working on the EZ economic recovery. Experts at Link Securities say that there won’t be any new measures for the monetary policy, although they believe Mr Draghi will announce the possibility of taking new actions to boost growth.