ECB’s Focus Shifting to Bank Lending

The ECB has repeatedly stressed the primacy of its PEPP asset-purchase program in tackling the economic impacts of Covid, despite the importance of the bank-lending channel for the European economy, given the high degree f financial intermediation. The decision taken...

Surge in EGB Issuance May Result in Lower 2H20 Supply

January is typically a very busy month for European sovereign issuance as national treasuries kick off their annual funding programmes. This year has seen a marked uptick in supply relative to the previous year as issuers have taken advantage of low borrowing costs to...

G3 Central Banks set Tone

The divergence in monetary policy across developed markets since the beginning of 2018 is starting to breakdown as Fed and ECB easing makes it increasingly difficult for the hawkish hold-outs to tighten. Above-target inflation in 2018/early 2019 provided cover for the...

ECB piling easing pressure on BoJ

Japanese equities have fallen out of favour with foreign investors over the past four years, since the initial euphoria of Abenomics faded (top-left chart). This has contributed to Japanese equities’ relatively low valuations, with the Topix becoming increasingly...

TLTROs are no Silver Bullet to Eurozone Problems

The ECB’s latest announced form of stimulus is a third round of TLTRO issuance. Previous tranches of TLTROs have been 4-year loans primarily made to European banks that are active in lending to the private sector. The rate paid on the loans is reduced as more of the...

Money markets show no faith in ECB to hike

This post was taken from our December 4th weekly report. While attention will inevitably be focused on the upcoming ECB monetary policy meeting in December and the expected end to asset purchases, money markets are increasingly pushing back against higher policy...

Markets Repricing for Eurozone Lowflation

Market-based measures of euro area inflation expectations have shifted lower, which could point to a delay in monetary policy normalisation. The first chart below shows the EUR 5Y5Y forward inflation swap, which has dropped sharply in recent weeks. A few years ago,...

Fig Leaves For Raising Interest Rates

Central banks are increasingly altering the perception of their reaction functions to allow tighter (or less easy) monetary policy. At the ECB, discussion of so-called “supercore” inflation has re-emerged. This consists of the components of the HICP basket that have a...