SSA Market: September is important - Rabobank

The beginning of September opens the door to a number of important scheduled events that are expected to shape the state of the SSA market over the remaining months of 2017, according to analysts a Rabobank.

Key Quotes

“Last week French President Emmanuel Macron released the details of his government’s planned labour market reforms.

“The Bundesbank now risks running into the 33% limit of its Bund purchases with our own calculation suggesting that if the German central bank were to continue purchases at the current monthly pace, it would run out of eligible government bonds in April of 2018. By default, this implies that the ECB will be forced to taper for technical reasons (remaining well short of their 2.0% inflation target). That said, the pace and magnitude of such tapering could well prove moderate given the GC’s likely concerns as regards the appreciation of the EUR over the course of this year (some 13% versus the USD, for example).”

“Toward the end of the month (September 24) German voters head to the polls to elect the country’s leadership and determine the mix of seats in parliament. Though the outcome is seen as restoring a safe pair of hands in the shape of Angela Merkel to the Chancellery, the country’s political establishment have been highly critical of the ECB’s QE programme on the grounds that it is tantamount to bailing out indebted states by stealth. The ECB has and continues to maintain that it has operated within its mandate and although some core politicians have argued their voters have been unduly penalised by QE, these same voters (savers) have also been the beneficiaries of record low borrowing costs. The latter element of this rationale, however, is not a message we anticipate Frau Merkel will be espousing as she extends her campaign trail.”