MADRID | JP Marín Arrese | The revised growth figure for the US economy in Q1 comes as a nasty surprise. It has dampened market sentiment worldwide. Earlier assessments blaming bad weather the moderate setback no longer hold when faced with a downturn close to 3%. Even discarding a fallback into full-fledged recession, it undoubtedly points to a markedly weaker performance than expected. The Fed tapering strategy is confronted with a baffling dilemma.
ZURICH | By UBS analysts | On 5 June, the ECB delivered a comprehensive monetary policy package, comprising cuts in the refi rate (from 0.25% to 0.15%), the deposit rate (from zero to -0.1%) and the marginal lending facility (from 0.75% to 0.4%). The ECB also rolled out the ‘full allotment mode’ – the commitment to supply unlimited liquidity (against adequate collateral) at the refi rate – from July 2015 to December 2016, and it will inject liquidity by ending the sterilisation of the Securities Markets Programme (SMP) portfolio.
MADRID | The Corner | The first quarter of the year is usually the best for lenders, and yet major European entities are showing the weakest results since Q1 2009: net profit fell once more (-9% yoy) to a pale EUR 12, according to a report by Deutsche Bank Research. Potentially high litigation costs and the upcoming ARQ and ECB’s stress tests make them eager to strengthen their capital buffers.
MADRID | The Corner | The liquidity net increase of the new measures by the ECB may be substantially less than expected, because of two main reasons: as a consequence of the 3-year LTRO maturity next December and February, and due to the improvement in the workings of the money markets.
NEW YORK | By Dickson Buchanan Jr. via Truman Factor | The European Central Bank’s (ECB) decision to charge a negative interest on overnight deposits is not going to lead to a higher targeted inflation rate, despite ECB President Mario Draghi’s insistence that it will. Like all cases of central planning, this decision will have unintended and costly consequences – some of which are already starting to play out.
MADRID | By Álex García
MADRID | By Carlos Díaz Güell | Last week’s greatest news for SMEs were the Targeted Long Term Refinancing Operations (TLTRO), variety of LTROs that got a T standing for target. Banks will be allowed to borrow money at 0.25% interest rate at 4 years max.
MADRID | By The Corner | Barclays analysts highlight the scarce impact of the European Central Bank’s measures on the inflation expectations. This is the chart that Barclays uses to show the inflation expectations one year before and one year after ECB’s decision.
MADRID | By Francisco López | It is not the first time economists, analysts and authorities recently talk about a possible bubble in the debt markets. But the latest, strong drops in peripheral bonds, in all-time minimums, have prompted alarms: there is too much euphoria and fixed-income market’s last moves doesn’t make sense.
LONDON | By Chris Walker and Marvin Barth at Barclays | Despite the ECB delivering more easing than expected, the EUR remains close to the levels heading into Thursday’s meeting. Did the ECB then fail? In a word, no. The ECB’s objective is to raise inflation from unacceptably low levels well below its mandate of “less than but close to 2%” and a crucial element of doing so is to keep inflation expectations anchored near the Bank’s target.