ECB: Not-so great expectations - Rabobank

Ten year Bund yields have eased back from their recent highs, trading 4bps lower overnight (0.54%) as we head into the ECB’s July meeting with no so great expectations for rates market, according to analysts at Rabobank. 

Key Quotes

“Ahead of Thursday’s press conference, a Bloomberg report has suggested that the Bank’s Frankfurt based staff have been working on a number of scenarios as regards the options the Governing Council (GC) have to hand as they seek to unwind QE. The report implies that little change is to be expected at this week’s meeting as staff are engaged in the preliminary work which will be refined over the summer months and ultimately seek to map out the tapering path and an extension of asset purchases at a reduced pace, the combination of which Bloomberg sources have suggested represent “hybrid strategies”.”

“According to the report, at this juncture, no formal proposals have been devised which suggests this week’s meeting of the GC will be used to discuss the details to hand thus far and potentially agree possible changes to the formal guidance laid out in the official statement. At this juncture, however, the sources suggest that the GC has limited appetite for policy change and have not yet held formal discussions in terms of bringing the programme to an end.”

“With bond purchases scheduled to continue at a pace of EUR60bn per month until the end of this year, the ECB has time to consider its options and develop a strategy that will result in a limited market impact yet ensure a smooth wind-down of the Bank’s ultra-easy, unconventional policies.”