ECB Acts Again - Implications And Trade Recommendations‏

Published 09/05/2014, 06:37 AM
Updated 05/14/2017, 06:45 AM

The ECB move implies higher excess liquidity (EUR200-400bn) for a prolonged period and a deposit rate further into negative territory.

Money market fixings will move lower and the search for yield will intensify, which will benefit especially periphery government bond markets.

Mario Draghi has put a floor under long-term inflation expectations by bein g very explicit about 5Y5Y inflation swaps.

So if data worsens further and inflation declines, then the ECB will step up and indicate more easing. Hence expect lower real interest rates.

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