rates

Easy money

Rates do matter

MADRID | June 14, 2015 | By JP Marín ArreseWe take for granted that close to zero rates remain the driving force for delivering growth. The massive liquidity pumped in by Central Banks in developed countries has led to this widespread belief on the merits of cheap money. But such manna brings with it a number of drawbacks. 


“QE ends and I feel fine”

WASHINGTON | Comment by UBS analysts | The FOMC ended QE and made its Fed funds rate hike guidance a bit more data- dependent. While the funds rate is likely to remain in its current range “for a considerable time” after asset purchases end at the end of this month, rate hikes could occur sooner or later than the Fed currently anticipates depending on the evolution of economic data. This was as straightforward an FOMC statement as could have been expected at the end of QE. It does not suggest changes in Fed thinking; nor does it change our expectations for the first Fed fund rate hike in mid-2015. 


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Spanish Treasury bills trading at negative rates for the first time in history

MADRID | The Corner | Although the eurozone economy in August has become the main focus of investors’ concern, peripheral debt continues to attract them. Yesterday, for the first time in history, the Spanish Treasury 3-months bills traded at negative rates on the secondary market. To date, the Treasury has covered 70% of the expected gross issuance in 2014 of 242,370 million euros, which means a decrease in the average cost of outstanding debt of 14 basis points since December 2013 to stand at 3.59% . However, the Treasury decided yesterday to cancel the auction of bonds and notes scheduled owing to the absence of investors because of the summer season.


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ECB to issue minutes, move to six-week schedule

ZURICH | By The Corner | As expected, the ECB did not unveil any new policy measures on Thursday. Although the Bank maintains an easing bias, it signalled that it wants to wait and see how the monetary stimulus delivered last month unfolds. UBS’ base case scenario remains that ECB rates will stay on hold for the foreseeable future and that QE will not be deployed. The key news from ECB’s meeting was more of a technical nature.