The ECB could announce a short taper to December current week. The central bank has to be consistent if QE is ending this year and, hence, according to BoAML’s analysts it has to send a reaffirming message on three criteria: convergence, confidence, resilience.
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Just a week before the new year begins some analysts are saying that 2018 looks likely to be the best year for global synchronized growth since 2011. In fact, Laurence Boone from AXA IM thinks that inflation should return and supportive monetary policy progressively withdrawn. Is this all too good to be true?
The ECB could first check how the market reacts to the actual halving of its purchases in January, and how the run-up to the Italian elections shape up, before changing its message.
BoAML | QE drove fund flows in 2016, but the past two months was all about reversing this trend. All-in-all, commodities, EM debt and IG were the winners; equities and HY the losers. For example, last week’s flows HG: +$1.6bn / HY: +$1.1bn / Equities: -$40mn
BoAML | The last few months have been jammed with corporate bond issuance in Europe: refinancing deals, M&A supply, foreign issuers, debut names and unrated bonds, for instance. Mario Draghi spoke highly of the Corporate Sector Purchase Programme at the last ECB meeting, and we think it reflects precisely this. The central bank has been able to quickly generate corporate bond supply (and buy it), helping to counter the frustrations with low sovereign debt issuance.
Now the most important companies can finance themselves at the same price as the government – at practically 0% – and they have benefited from this…But it doesn’t mean that these optimal conditions are fuelling a greater amount of real investment: companies have taken advantage of this to pay more dividends and reward shareholders with buybacks.
Mari Pinardo | Do you remember the summer of 2012, when Spain’s risk premium reached a record high of no less than 638 basis points? Four summers later, this spread seems like it belongs to a completely different country. Since that fateful summer, Spain’s sovereign risk has declined nearly 550 bp and just last week broke the 100 bp threshold. There are basically three reasons which have pushed the risk premium through the 100 bp threshold: a date for Spain’s caretaker Prime Minister Mariano Rajoy’s investiture, the economic policies which have been in place in the Eurozone since April 2015 and the fact that it looks less likely the Fed will raise interest rates in September.
UBS | Positive developments for Greece and broader European assets Monday’s Eurogroup on Greece contained a number of positive developments relating to the country’s on-going programme review as well as debt relief. We expect those developments to support Greek and broader European risk assets, where we have argued for upside (see most recently “Which risks to fade; which risks to take” ).
AXA IM | The technical details of the ECB’s corporate QE programme, the corporate sector purchasing programme (CSPP), released last Thursday, cemented our constructive view about its impact on credit markets. The CSPP details matched or exceeded market expectations, adding to the positive spread momentum that has been in motion since the initial CSPP announcement on 9 March.
Benjamin Cole via Historinhas | Of late in monetary blog-land has been bruiting about central bank helicopter drops, usually defined as a last resort to boost aggregate demand and fight deflation.