Tag: ECB
May
Buy, buy, buy
Going for carry continues to be the name of the game, while the consideration of the credit risks involved seems once again to be a secondary concern. The risks of a bond bubble are no doubt in the air, but this trend has not run its course.
Danish interest rate forecast: All doors are kept open
The ECB responds to the persistent economic slowdown The Danish central bank “only” trims its lending rate slightly Risks are skewed towards yet another rate cut … but we expect the bank to keep rates steady this year and adapt …
Dansk renteprognose: Alle døre står åbne
ECB har taget konsekvensen af den fortsatte økonomiske afmatning Nationalbanken ”nøjedes” med en lille nedsættelse af udlånsrenten Risikoen peger mod endnu en rentenedsættelse…men vi venter, at Nationalbanken holder renten i ro i år, og tilpasser sig til ECB i løbet …
New forecasts for ECB, market rates and the EUR/USD
We now expect the ECB to keep rates unchanged at the current level until the beginning of 2015. Risks are clearly skewed towards another rate cut in the near term. Speculation in a deposit rate cut could take market rates to new lows in the near term and we have revised the market rates forecasts lower on all horizons. Lower EUR rates have implications for the EUR/USD forecast in the longer run, and we have decided to lower the end-2014.
ECB cuts rates and has an open mind
The ECB cut its refi rate by 25 bp to 0.5% as most expected. With the interest rate cuts the ECB do seem to be delivering something when not being able to deliver what it actually wants to, ie support to SMEs. Still, Draghi also seems more open than previously to further easing steps even after today’s decision to cut interest rates, which will support risk appetite in financial markets.
Cheføkonomens hjørne: Vi sidder stadig fast i sumpen
Som en anden Baron Von Münchhausen bliver Europa nødt til at trække sig selv op af sumpen ved håret. Det var indledningssvadaen fra den tyske præsident for den Europæiske Investeringsbank, Werner Hoyer, på en international finanskonference, som jeg deltog på …
ECB sænker renten
ECB valgte i dag at sænke renten med 25bp. Det er den forværrede økonomiske situation i euroområdet, som får Draghi &Co. til endelig at kaste håndklædet i ringen og gennem rentenedsættelsen at forsøge at skabe lidt mere liv i den …
Low Euro-area inflation – good news or bad?
The Euro-area flash estimate for inflation in April fell to 1.2%! This follows a reading of 1.7% in March and we have looked a bit deeper into a few questions: Temporary or permanent? Good news or bad? ECB reaction or not?
April
Negative interest rates – the Danish experience
The European Central Bank (ECB) faces mounting pressure to ease monetary policy in the Euro area. In our view, this leaves the ECB with four options: Keep the powder dry and hope for the best – unchanged rates (60%) The …
Danmark Update: Erfaringer med negative renter
Den Europæiske Centralbank er under et tiltagende pres for at lempe pengepolitikken i Euroområdet. Efter vores vurdering efterlader det ECB med fire muligheder: Hold krudtet tørt og håb på bedre tider – uændret rente (60 pct.) Det sikre valg – …
ECB preview: No rate cut
Markets have once again started pricing in some risk of a rate cut and a majority of analysts now expect a refi rate cut from the ECB already at the meeting this week. We stick to our call and find it most likely that the ECB will keep rates on hold and instead come up with new measures to support bank lending to Small and Medium-sized Enterprises (SMEs).
Ray of light in Euro-zone credit numbers
If you torture the data long enough, it will confess. One can find hope in today’s Euro-zone credit numbers for March, though if you are pessimistic, the data offers a lot for you as well.
Can negative be positive?
The concept of negative nominal interest rates has usually been considered something possible only as a short-term market aberration. Not anymore. Could negative interest rates really save us?
Today’s PMIs will not prompt an ECB rate cut
We believe the ECB sees additional interest rate cuts beyond the current level as more or less ineffective. That is the reason, in our view, that interest rates were not cut already in December. However, key figures have surprised to the downside and we believe the ECB will have to act if the bank believes the economic outlook has weakened further or if it is unable to come up with an SME “support package” even if it believes the effect will be limited. An unchanged PMI reading today does not make a big difference in our opinion.
Welcome to the world of wild mood swings
Big market moves have caught a lot of attention in the past few days. Where is the world going?
New financial forecasts
We have made a number of adjustments to our financial forecasts including US rates, EUR/USD, GBP, CHF, JPY and base metals. The big story is unchanged!
Deflation and the ECB
That the inflation rate in Greece fell below zero in March for the first time in 45 years gets quite a lot of media attention. The deflation ghost is out of the bottle again – is it really? Or has it …
Draghi turns more dovish
Draghi turned more dovish at today’s ECB press conference. Another rate cut has become more likely, but still depend on incoming data in the near term.
ECB preview – still too early for Draghi to signal near-term rate cut
We expect no changes in key policy rates and no new non-standard measures from the ECB at Thursday’s meeting. Lots of questions about Cyprus, but Draghi will probably not give any answers. Market reaction could be slightly negative again.
March
Be careful what you wish for
The EU appears to have fast-tracked its plans for bank resolution in earnest, at least based on the comments from the Eurogroup President Dijsselbloem. Such plans are another blow for the funding outlook of banks, and risk escalating the euro crisis again.
This deal sends more constructive signals – credibility still hurt
A deal on Cyprus was finally reached this morning. Unlike the earlier agreement that basically sent the message that all depositors in troubled banks should immediately withdraw their money, the terms of this agreement actually send a more constructive message. Still, days of wrangling and bad suggestions earlier have hurt the credibility of Euro-zone decision-makers further.
Cyprus votes no before voting yes
The Cypriot parliament yesterday rejected the proposed bailout including the controversial levy on bank deposits, putting the future path of Cyprus very much in question again. However, as the alternative for the bailout for the country looks much worse than the terms of the aid package, Cyprus will most likely have to accept the terms in the end.
New financial forecasts
Here are the usual financial forecast slides with our new financial forecasts published this this morning in Economic Outlook. We have changed our forecast for the Fed, the BoE, the SNB, Riksbanken, Euro rates, USD rates, EUR/USD, JPY, GBP, SEK, NOK, oil and the base metals.
ECB keeps rates unchanged, but rate cut risks remain
The ECB decided to keep interest rates unchanged at today’s meeting. Draghi’s statement was more or less unchanged in its wording compared with the statement a month ago. Draghi remains dovish but more weakness is needed to make the ECB cut rates.
Italy update: Uncertainty here to stay
Italy update: Uncertainty here to stay One week after the elections in Italy ended without clear majorities, we give an update from a markets, a political and an economic perspective as well as on our ideas on how it might …
ECB preview: No help for Italy
We expect no changes in key policy rates and no new non-standard measures from the ECB at Thursday’s meeting. The new staff projections for growth and inflation will be roughly unchanged. There will be no help for Italy from the ECB.
February
Not such a big rush this time
The ECB announced today 356 banks would return a total of EUR 61bn of the 3-year money they took from the central bank in the second 3-year LTRO early last year. The numbers illustrate that a considerably amount of excess liquidity will remain in the system for a long time, keeping overnight rates close to current levels. The banking system in general will heal only slowly.
Now for the second big one
The other bigger one-time repayment of ECB 3-year loans will take place next week, when the second 3-year LTRO will have its first repayment date. The repayment interest is likely to come below the EUR 137bn seen in the first operation. That said, as we have seen a notable correction lower in short interest rates since the first repayments, risks are tilted towards higher rates and a steeper money market curve ahead of Friday’s data.
ECB på stand by
Som ventet holdt Draghi & Co. renterne uændret på dagens møde i ECB. Også tonen var nogenlunde den samme som i januar. ECB ser således fortsat ret dystert på den økonomiske udvikling og understreger, at der fortsat er risiko for, …
Draghi optimistic but “monitoring closely”
The ECB left key policy rates unchanged as widely expected. Draghi struck an optimistic tone, but was maybe slightly more concerned about the LTRO repayments and EUR strength than most had expected.
Siesta no more
Political risk has been on the rise again in Spain and Italy lately, serving as the latest reminder that the risks inherent in these countries have by no means gone away. As the Spanish corruption scandal is far from resolved, while Italy is headed for uncertain parliamentary elections, market tremors will likely continue in the near future.
ECB preview: Is Draghi concerned about LTRO repayments and EUR strength?
I expect no change in rates, no new non-standard measures and no change in bias. Is the ECB concerned about large-scale LTRO repayments draining liquidity? Is the ECB concerned about the rise in short rates and strengthening of the EUR?
January
Strong EUR could prompt an ECB rate cut
Expectations of another ECB rate cut were taken out of the markets after the January ECB meeting when Draghi was perceived to be too upbeat on growth prospects to consider cutting interest rates again. Ironically, Draghi’s tone and the surprisingly large LTRO repayments may force the ECB to cut interest rates again!
An era coming to an end
In this analysis we present an updated forecast on Danish yields. In here we find that: Mounting pressures on the krone prompted the Danish central bank to sanction an independent rate hike, marking the beginning of the end of an …
Banks rush to repay the ECB – at least initially
The ECB announced that 278 banks will repay a total of EUR 137bn of the 3-year loans taken from the central bank. The amount paid was higher than many had expected, and has put upward pressure on rates. However, one should not draw the conclusion that monetary policy was about to see an abrupt tightening and that rates would be heading higher for good.
Portugal is back
Portugal followed in the footsteps of Spain’s hugely successful bond launch yesterday, making a comeback to bond markets for the first time since its bailout from other Euro-zone countries and the IMF. The Portuguese bond sale was just the latest reminder that confidence towards the Euro zone is returning.
LTRO repayments will be mostly good news
In our view, the key questions are: 1.Who will repay and how much? 2.Will short rates move higher if a lot of LTRO loans are repaid? 3.Is it a good or a bad sign if a lot of LTRO loans are repaid? 4.Is there a case for an ECB response? 5.What will happen to German bonds?
FI Strategy – LTRO and the early repayment option
On Friday, January 25, the ECB will announce the first amount to be repaid of the three year LTROs. We estimate EUR 200bn to be paid back during 2013, with limited market impact in the short term.
ECB to start buying soon?
When the ECB announced its Outright Monetary Transactions (OMT) programme last autumn, Spain was expected to take advantage of the programme rather quickly. The activation of the OMTs would have required an aid programme for Spain, which the country was reluctant to apply for. Could Ireland become the first direct beneficiary of the programme?
Growing optimism drives Danish rates higher
In the attached analysis we present an updated forecast on Danish yields. In here we find that: ECB on the sideline amid rising risk appetite in financial markets and a stabilisation of the economic growth outlook. We expect the Danish …
We don’t want your money
Banks will have the first chance to repay the 3-year money borrowed from the ECB on 30 January. Early repayments are likely to give rise to pricing of higher short rates and cause some jitters of tightening policy. Despite the repayments, plenty of excess liquidity will remain, keeping short rates very close to current levels.
Stigende optimisme trækker de danske renter højere
Vi har opdateret vores prognose på de danske renter. I den nye prognose konkluderer vi, at: ECB på sidelinjen efter stigende risikoappetit på de finansielle markeder og en stabilisering af de økonomiske vækstudsigter. Vi forventer, at Nationalbanken er klar med en …
Financial forecasts – New Year is over, but the party is not
We have only made minor changes to the financial forecasts this time: We have lifted our mid-year target for the EUR/USD to 1.25, made minor changes to the GBP forecast, lowered our 3M EUR/SEK forecast to 8.60 and we have postponed the first hike from Norges Bank to March 2014 and only expect two hikes in 2014.
Draghi keeps the door wide open for more easing, but it will require more weakness
The ECB decided to keep interest rates on hold today as most had expected. At the press conference, ECB President Draghi more or less repeated the statement from December, which in our view means that the door is wide open for more ECB easing, but it will require more economic weakness.
ECB har pacificeret Nationalbanken
Den Europæiske Centralbank har i dag annonceret, at de fastholder alle deres ledende renter uændret. Dermed er presset også taget af Nationalbanken, der med meget stor sandsynlighed vil fastholde de danske renter uændret senere i eftermiddag. På det efterfølgende pressemøde fastholder …
Spain to a flying start with its 2013 issuance
Spain sold a total of EUR 5.8bn of bonds today, which was more than the indicated EUR 4 to 5bn target range for the auctions. This represents just shy of 5% of the estimated total long-term borrowing requirement for the year. Today’s news was certainly positive for Spain, but one should not get too carried away. Spanish issuance needs going forward are daunting.
Price level targeting – next ECB easing step
The next easing step from the ECB could be the introduction of a temporary price level target path.
ECB preview – no rate cut, but dovish tone
I do not expect any action from the ECB at this Thursday’s meeting. There is still a risk that the refi rate will be cut, though, and, if not, the door will be kept wide open for future rate cuts.
December
Some pigs can fly
What do Portugal, Ireland and Italy have in common? Their government bond markets have all produced a return of more than 20% in 2012. These numbers handily beat the around 4% return from German bonds. In fact, among larger Euro-zone countries, Germany has been the worst performer in 2012.
Many Euro-zone countries with sizable borrowing needs also in 2013
2012 is drawing to a close. Despite worries of the contrary, both Spain and Italy have been able to satisfy their borrowing needs via the bond market – albeit with quite a lot of help from the ECB. Still, the issuance picture suggests especially Spain will face notable challenges ahead.
Setback ahead for Italian bonds?
Italian bonds have seen almost stellar performance lately, with the year-to-date return from Italian bonds in general standing at close to 20%. Profit-taking and a correction higher in yields look likely at some point. Such a move may have started yesterday, as the future of the government was put in doubt.
Draghi turns slightly dovish
The overall impression of the press meeting is that that Draghi has turned slightly more dovish, but not enough to make a clear signal of an upcoming rate cut. However, the ECB has enough ammunition to cut interest rates in Q1, if the economy weakens more than currently expected.
November
Monetary policy already tightening in the Euro zone
While the ECB has continued to introduce new measures to make its monetary policy more accommodative, in some respects policy has actually become tighter, and may continue to do so going forward. More specifically, the excess liquidity in the Euro-zone banking system has fallen quite clearly already from its highs.
Nothing new from the ECB
The ECB kept its key interest rates unchanged as widely expected. At the press conference, Mr Draghi more or less repeated his statement from the October meeting.
ECB in wait-and-see mode
The outlook has not changed and hence new easing measures are not justified at this point. If anything, the ECB could be considering new measures to improve monetary transmission in the periphery. We view tomorrow's meeting as market neutral.
Global Week Ahead – Focus turns to elections in the US (and in China)
Elections in US and in China will dominate headlines. Central bank meetings at the ECB and the Bank of England. First independent Danish rate hike in almost four years, weak Swedish production numbers and low Norwegian core inflation.
October
Euro-zone banks not about to boost a recovery any time soon
The results from the ECB’s latest bank lending survey (Q3) only add to worries that credit growth is not going to support an economic recovery any time soon. The results thus add to downside risks for the economy. The dark clouds hanging over the Euro-zone economy are not going disappear any time soon.
How would ECB bond purchases affect the level of interest rates?
The effect of the ECB’s bond purchases should be felt also outside the bond markets directly targeted by the interventions. The purchases should put in general downward pressure on the maturity segment targeted, but cause upward pressure in longer maturities (on average).
Spanish aid request a step closer
Pressure on Spain is mounting again, with S&P downgrading the country to the lowest investment grade rating, Moody’s likely to go a step further soon, while calls for independence in Catalonia are not exactly calming. Higher yields will likely be needed to persuade Spain to make an official aid request.
Nordea Risk Perception Publication
Risk perception kept low on bold policy actions – look for tail risk hedges.
ECB staying put – time for the governments to act
The ECB seems rather comfortable with the current situation, and clearly sees it is up to the governments to take the next steps. The more important next step will be an aid request from Spain, but it might still take at least several weeks for such a request to surface.
Tough questions, few answers
Both the ECB and the Bank of England will announce their latest monetary policy decisions tomorrow, but neither is expected to do much new at this stage. Draghi will probably dodge the toughest questions on the ECB’s announced bond purchase programme, while BoE is more likely to take the decision on expanding its bond purchases next month.
NEMO: From crisis to crisis
Nordea Economic and Market Outlook: Our latest take on Nordic and Global financial markets and economies.
Where can we find more money for Greece?
There are several options to give Greece more time to reform its economy but trickier still is convincing the IMF the debt remains sustainable. In any case, it looks all but certain that Greek debt will need to be restructured again - sooner or later - meaning losses for the public-sector creditors.
New financial forecasts: To ask or not to ask? That is the question
Focus on Euro-zone problems continue. We don't expect economic key figures to surprise on the upside. Risk on/risk off to ebb and flow and we're keeping our forecasts mostly unchanged.
September
Global Week Ahead: More of the same
More details from the ECB on OMT, September employment report and ISM manufacturing survey from the US, minutes of the FOMC meeting, UK PMI figures and the Bank of England rate decision.
Euro-zone inflation still stubbornly high
Despite expectations of limited price pressures, Euro-zone inflation surprisingly accelerated from 2.6% y/y to 2.7% vs. the Bloomberg consensus estimate of 2.4%. Even though inflation is not really the main thing on the ECB’s radar at the moment, especially the more hawkish members of the Governing Council will pay attention to these numbers.
FX Comment: as long as we trust
After a week of consolidation, the outcome of the confidence game is in Spain's hands...
Euro-zone manufacturing PMIs mostly good news
Confidence in the Euro zone remains depressed and implies weak economic performance will continue. That said, it is positive we saw more signs that confidence would have at least stabilized. Germany and France saw very divergent development.
G10 Weekly: When QE becomes futile
In this issue we take a stance on QE, which we think will end up being futile.
Danish Central Bank readies to go solo
Within the next three months the Danish central bank will make its first independent rate hike since 2008.
Danish Central Bank readies to go solo
Within the next three months the Danish central bank will make its first independent rate hike since 2008.
Dansk renteprognose: Nationalbanken gør klar til enegang
Vi har opdateret vores danske renteprognose. Heri konkluderer vi at Nationalbanken inden for de kommende tre måneder gennemføre den første selvstændige renteforhøjelse siden 2008. Samtidig venter vi højere markedsrenter, stigende spænd mellem danske og tyske statsrenter samt en udvidelse af DKK-EUR swapspænd.
New financial forecasts: Central banks taking out the bigger guns
The Fed’s new bond purchases and changes to the communication strategy illustrate that the Fed is determined to shift the US economy into higher gear, though we need action from Congress as well.
Euro-area crisis management is on track
(Updated 11:22 CET) The results of the Wild Wednesday in the Euro area are generally positive for the Euro area and for the markets, at least so far (Dutch election pending). The German Constitutional Court allowed German ratification of the ESM and the European Commission’s proposal for a Banking Union were by and large as widely expected.
Commision proposes common supervision for all Euro-area banks
The European Commission published its proposal for a Banking Union today. The big lines of the proposal are in line with general expectations. The political struggle is just beginning…
Week ahead: huge event risk creating volatility
QE3 from Fed and Wild Wednesday in the Euro area next week
Is unlimited limited after all?
The likely amounts involved in the ECB’s OMT programme are unlikely to be huge, at least initially. However, it usually takes some time to win confidence back, meaning also the ECB will have to put some money behind its words.
ECB more or less as expected
The ECB keeps key interest rates on hold. ECB President Draghi announced some details of the ECB's new intervention mechanism called "Outright Monetary Transactions" (OMT) and easier collateral requirements.
Devil in the details
Euro's fate in ECB's hands today.
Euro Area: Restore confidence to end recession
Here is a presentation of our new Economic Outlook for the Euro area – Restore Confidence to End Recession.
Mildly disappointing ECB on Thursday
The ECB is likely to disappoint financial markets mildly at this week’s meeting. Still, looking ahead, I believe ECB interventions will come and will be decisive.
August
Week ahead: ECB unlikely to live up to expectations
Will the ECB deliver? Hopes are high but expect somewhat of a disappointment as they won't reveal all.
Major event risks ahead for the Euro area
During the coming week's there are a number of major event risks on the Euro-area calendar. Here is a short presentation with my take on what to expect
Euro-zone bailout fund struggling to find demand
The EFSF barely received sufficient orders for its new EUR 3bn 10-year bond issue. This suggests, at least, the EFSF will have to pay a higher premium for future bond issues, which will also turn into higher funding costs for countries receiving financial aid.
Draghi on the future of the EUR
The ECB President Mario Draghi is one of four key Euro area leaders that have been given the task to come up with a vision for the future of the Euro area. A short article on the subject has just been released.
Impression from Madrid (presentation)
Here is a presentation containing charts and comments supporting our general view on Spain
Week Ahead: Fewer new policy signals in store than hoped for?
New policy signals are eagerly awaited from major central banks at the moment, not least from the US Fed and the ECB.
New Financial Forecasts: Big Bertha about to fire…
We are lifting our short-term interest rate forecasts but keeping the 2013 forecasts. We’re in the midst of updating our macro forecasts and will introduce 2014 financial forecasts in a fortnight.
Week ahead: Economic data and a dovish Fed to support risk appetite
Next week’s macroeconomic releases and events are, in our view, generally likely to give further support to risk appetite in financial markets.
Week ahead: Looking for answers
Markets are waiting for cues to take new direction - cues about possible decisive ECB intervention and/or more evidence that the big economies are starting to recover modestly.
Chief Economist’s Corner: Super Mario nowhere near ‘game over’
It is not for nothing that Mario Draghi, President of the European Central Bank (ECB), is sometimes referred to as “Super Mario”. Just like the super hero in the computer games, he faces almost impossible tasks.
Cheføkonomens hjørne: Super Mario er langt fra game over
Spændingen var stor inden torsdagens pressemøde i ECB. Ville Mario Draghi afsløre detaljerne for den ultimative redningsplan for eurozonen – eller var det tomme ord.
Week ahead to be dominated by uncertainty
The dust has not yet settled after yesterday’s ECB press conference, where President Draghi dealt a blow to hopes that the central bank will quickly make huge bond purchases to address the Euro-area debt crisis.
ECB med kime til noe stort
Markedet reagerte negativt på gårsdagens budskap fra Den europeiske sentralbanken. De negative markedsreaksjonene må sees i lys av at Draghi selv hadde skapt høye forventninger og at markedsaktørene gjentatte ganger er blitt skuffet over uferdige annonserte redningstiltak.
ECB hints intervention, but gives few details
(Last update 16:12) The ECB is ready to buy bonds directly in the markets. The details remain unclear. Moreover the ECB is likely to cut interest rates in September.
July
ECB intervention possible
Some actions are possible at Thursday's ECB meeting, but a high degree of political uncertainty makes us believe that verbal support is what we will get. Intervention hints are possible.
No signs of a credit crunch, but still weak loan demand
ECB’s lending survey and the Ifo reading point to weaker growth momentum in the Euro area and support the view that the ECB will cut interest rates again.
Euro PMI stabilises
The flash Euro-area PMI stabilised in July. The numbers are bad but the situation did not worsen in July compared with June, which means that the ECB is likely to keep interest rates on hold at the August meeting.
Better risk appetite alone not enough to lift yields
In the past weeks, bonds perceived to be the safest have performed at the same time as equities have. Despite the small pick-up on risk appetite, the safest bonds are likely to perform well also going forward, as the huge liquidity coupled with uncertainty about the future of the Euro-zone will continue to provide support.
Better to lose some of your money for sure than to take a little more risk?
Belgium joined the growing group of countries able to sell T-bills at negative rates today, another illustration of what the huge liquidity coupled with a zero per cent ECB deposit facility rate does.
Better to lose some of your money for sure than to take a little more risk?
Belgium joined the growing group of countries able to sell T-bills at negative rates today, another illustration of what the huge liquidity coupled with a zero per cent ECB deposit facility rate does.
The plunge in the ECB’s deposit facility usage does not really tell us anything new
The usage of the deposit facility does not tell us anything about lending to the real economy in the short term. The money cannot disappear from the banking system: as long as banks borrow more from the ECB than is needed to fulfill the reserve requirements of the banking system, there will also be excess liquidity.
Some good news for Spain – but much remains unclear
The Eurogroup made only small progress detailing decisions from the June summit. Spain will have more time to reach its deficit targets and recapitalisation plans are taking shape. But a lack of detail and differing interpretations will cause uncertainty.
New Financial Forecasts
We have updated our financial forecasts. We are keeping our outlook basically unchanged, expecting choppy trading over summer.
ECB’s 25bp rate cut unlikely to be the final easing step
The ECB's easing measures are not likely to be over yet. However, it sees limits to what it can do, so Euro-zone governments need to do a big part of the heavy lifting, with the ECB making sure that its monetary policy helps the process.
A small tightening step from the ECB before more easing
We expect the ECB to cut the refi-rate by 25 bp at the meeting tomorrow but perhaps more interesting we also expect to see a cut in the deposit rate to 0.10%.
What if the deposit rate becomes negative?
We expect that the ECB will try to come to the rescue of the ailing economy by trimming its deposit rate on Thursday. With the continued DKK strength, the Danish central bank will as a minimum be forced to follow suit, which will mean a negative CD rate in Denmark.
June
Week ahead: more weak data but do not worry – central banks are rushing to help
After all eyes being in Euro-zone events lately, next week’s heavy US data certainly has potential to catch the attention again.
Concrete measures instead of just words needed to really boost Spanish and Italian bonds
All in all, there was notable progress at the Euro-zone summit, and the boost to sentiment should last longer than two hours this time. However, a lot of details remain in the dark.
Italy-Germany: 3-2
The Euro area is moving ahead with the common banking supervisor, direct lending to banks and supportive buying in the markets. Positive but not a game changer.
ECB already doing more
The calls for the ECB to do more have become ever louder lately, while the central bank has tried to play down expectations of more bond purchases or further extra-long refinancing operations. Nevertheless, at the same time the central bank has been increasing its support via its more conventional refinancing operations.
New Financial Forecasts
We have made minor adjustments to our financial forecasts. The storyline is more or less unchanged.
Greece has a government – now for the hard part
Now the tough part begins: re-negotiating the terms of the Greek stability programme. The two sides are likely to be miles apart in their demands to begin with.
G20 leaders very committed again – at least on paper
The statement from the G20 leaders contained a lot of good intentions again, but whether they will lead to any concrete implementation remains to be seen.
Rates comment: This time the relief should last longer than just a few hours
One should not expect any major risk rallies or bond sell-offs on the back of the Greek elections, we already saw notable corrections in markets ahead of the elections.
Greece stays in the Euro area (for now)
The pro-bailout parties secured enough seats to form a government at Sunday’s election. That is a relief to the markets, but does not solve the debt crisis.
Oops, should I have said that?
With 17 countries trying to reach common decisions, differences in opinions are bound to arise. The Austrian Finance Minister Fekter let it slip in a television interview that also Italy might need financial help.
Tricks to be used to avoid preferred creditor status in Spanish bailout loans?
According to a senior Euro-zone official via Reuters, the Spanish banks could be recapitalized using EFSF bonds to avoid the problem of the preferred creditor status of the ESM. The bailout could later be shifted to ESM, but the extended loans would not become senior to other debt.
ECB kept rates unchanged
Contrary to our expectations, the ECB kept interest unchanged at today’s meeting. We expect a rate cut in July.
Three survival questions for the Euro area
Can the Euro area survive a Greek exit? Will Spain ask for an EU/IMF bailout? What actions will be taken at the 28-29 June EU summit and will it be enough to secure the survival of the common currency in the longer term?
Q2: Will Spain ask for an EU/IMF bailout?
The fate of the Spanish banking sector is one of the major risks facing the Euro zone at the moment. Spanish banks will likely need much more state help than Bankia alone requires, and this will be too much for the Spanish government to stomach.
Q3: Will the euro survive in the longer term
Politicians have started to show a sense of urgency, but decisive measures will take years to implement. Still the EU summit on 28-29 June might give some rough sketch of a road map for further integration.
Week ahead: the ECB to deliver?
After this week’s heavyweight US economic data, the spotlight is even stronger in the Euro zone again next week.
May
Global economy still expanding despite crisis
An increasingly clear picture is emerging of a US economy that has gained momentum and is slowly heading for a selfsustaining upswing, while Europe seems to be sliding into a deeper crisis than previously anticipated.
LTRO support for Italian and Spanish bonds behind
April data from the ECB revealed that Spanish banks actually decreased their government bond holdings by some EUR 3bn vs. average net purchases of some EUR 20bn in the prior three months. With a dark cloud hanging over the Euro zone at the moment, yields may need to rise notably to attract new investors to the markets.
Beware of curve flattening
Many have missed the upward move in short Spanish and Italian short yields lately. The rise in short rates is worrying both because it means that the country in question is facing high funding costs throughout the curve and since it signals increased shorter-term worries.
ECB to cut interest rates
After another round of disappointing survey data we believe the time has come for the ECB to cut interest rates.
Weaker growth momentum in the Euro area
Today’s disappointing numbers point to a significant contraction in the Euro area in Q2 and shows that the Greek crisis is spreading to the German and French economies. Risk of rate cuts from the ECB during summer.
Week ahead: Central bank intervention looming?
All eyes remain on anecdotal news on how depositors in Greece and outside the country are reacting to the recent events. In terms of economic data releases, the main focus will be on flash PMIs for May.
The €nd?
New elections have been called in Greece and so we look at the timeline of what might happen in the coming months and the consequences if a solution to Greece's problems is not found.
ECB intervention looming
With market strains increasing rapidly, the ECB remains the one with the capacity to react fast. After the ECB has acted first to try to bring some calmness to markets, something could happen on the government front as well.
Euro-zone austerity strategy rethought
According to the Financial Times, Spain could be offered an extra year to hit the 3% of GDP deficit target. This is likely a step in the process, where the strategy of front-loaded austerity measures is rethought and economic growth given a higher priority.
Euro-zone debt worries continuing to push German yields to new lows
With German bonds enjoying strong momentum, yields could fall even further. The pricing of a risk of some sort of a Euro-zone break-up will likely increase on the back of the Greek situation, while the Spanish situation continues to be another source of uncertainty.
NEMO: Europe heats up over the Summer
Our latest take on Nordic and Global financial markets and economies.
Not much new from the ECB
The ECB decided to keep interest rates unchanged at today's meeting and gave no new signals.
Draghi to strike a mildly dovish tone today
Additional crisis measures are not on the cards at the ECB meeting today – but we see an increasing risk of an additional rate cut if the expected recovery of the Euro area fails to materialise.
April
Italian and Spanish yields jumping despite buying from domestic banks
Italian and Spanish bond yields rose notably in March despite continued support from domestic banks. This does not bode well for the future, as the pace of purchases by banks is not at least set to increase.
Correction due, but next week’s data to feed the bond rally
Bond markets appear due for a correction, but we expect next week’s events and economic data only to add to the gloomy sentiment.
ECB’s lending survey adds to growth concerns
The need for additional crisis measures from the ECB has diminished, but interest rate cuts have become more likely!
To QE or not to QE
The big central banks have turned out to be much less inclined to QE than expected. We no longer expect QE from the Bank of England in May.
The firewall never going to be big enough to work on its own
The G20 finance ministers will likely agree on increasing the resources of the IMF later this week. Such a decision, though not insignificant, is unlikely to change the course for markets.
Minor changes to financial forecasts
We see rates continuing lower in the coming months and the EUR/USD unchanged around the current levels.
Minor changes to financial forecasts
We see rates continuing lower in the coming months and the EUR/USD unchanged around the current levels.
Spanish banks well-prepared for upcoming redemptions
Most news stories only report the jump in overall central bank borrowing by Spanish banks in March, but miss the increase in funds Spanish banks have in reserve to meet future funding needs. The funding position of Spanish banks – like that of the Spanish sovereign – is actually relatively good at the moment.
Italian T-bill yields jump but alarm bells not ringing particularly loud yet
Even though the recent rise in Italian yields is worrying, the threat of an immediate funding crisis remains limited. Still, the pressure on Italian bonds is likely to continue in the near future.
Liquidity boosting the safest assets again
The huge liquidity sloshing around is boosting the safest asset classes again, while Spanish and Italian bonds remain under pressure. This is likely to continue, until we see some better economic data again.
Spanish bond yields to continue to rise
Today’s Spanish auction results further illustrate that the support from the ECB’s 3-year refinancing operations is waning. Spanish yields will likely continue to lurch higher, leading to higher uncertainty about the Euro-zone situation again.
Differences in collateral rules increasing Euro-zone worries
The differing collateral policies implemented by national Euro-zone central banks put banks in various parts of the Euro-zone in different positions. Such policies increase worries about the cohesion of the Euro zone.
Risk-reward favours 2-5-year flatteners
The huge amount of excess liquidity in the Euro-zone banking system is still favouring a flatter curve, carry is positive for flatteners, while the curve tends to flatten, when short rates start to rise. The 2-5-year curve should still have flattening potential left.
March
The Eurogroup agrees to increase firewall to EUR 700 bn
Earlier today the Eurogroup announced that the total size of the Euro area's firewall will be raised from EUR 500 bn to EUR 700 bn. This is a welcome move - which should have a positive effect on markets as well - if they can be bothered to care now that the ECB has doped everyone with the two 3-year LTRO's.
Spain and Italy still deep in the woods – German bonds to remain supported for now
Spanish and Italian bond yields are likely to continue to creep higher, as the support from domestic bank buying fades. Such market action will likely increase general worries about the course of the debt crisis, keeping German bonds well-supported.
Italian and Spanish banks continue government bond buying spree in February
Fresh data from the ECB show that Italian and Spanish banks continued to purchase solid amounts of government securities in February. No doubt the ECB’s 3-year LTRO is the main reason behind this move – driving Italian and Spanish yields lower.
ECB bond purchases only a shadow of their former self
The ECB's bond purchases have been very modest recently. Arguably, bigger purchases would not even have been necessary lately. However, the Securities Markets Programme of the ECB has become more of a blunt weapon also in general, and has less potential to fight the debt crisis, if the need arises again.
More movements within AAA-rated country bond spreads
The outlook for Dutch bonds looks much more clouded than that for their Finnish counterparts. Whereas Dutch bonds are burdened by political uncertainty, big deficits and another economic recession, Finland is making headway to balance its books.
Disappointing Euro PMI’s send yield spreads wider
The decline in composite PMI was driven by a 1.3 index point fall in manufacturing PMI to 47.7 in March.
The Euro area: The ECB has done its part – now it’s up to politicians to solve the debt crisis
The ECB kept all interest rates unchanged at todays meeting. At the same time Draghi used the press conference to signal stable rates ahead, while further 3-year LTRO’s are off the table.
Euro area update: Target 2 imbalances worries the Bundesbank
After the record breaking allotment of EUR 523 bn in the ECBs second 3-year Long Term Refinancing Operation, attention has once again turned to the build-up of Target 2 balances.
February
Central Bank Watch: Another rush of liquidity to Euro area banks
The scene is set for further “risk on” after the ECBs second 3-year Long Term Refinancing Operation (LTRO) resulted in allotments of EUR 529.5 bn.
Markets too complacent
Considering the macro risks hanging over the global economy, we argue that markets may be too complacent. We see four downside risks that could materialise this year, undermining global growth and eventually negatively affecting investor confidence and market valuations of risky assets.
Spanish and Italian banks went on a bond binge in January
Ahead of the ECBs next 3-year LTRO it is interesting to note that the first 3-year LTRO from December prompted Italian and Spanish banks to go on a bond purchasing spree in January.
The ECB’s second 3-year operation likely to disappoint
The ECB will release the results from its second 3-year operation next week and expectations have been set high that another huge liquidity injection would boost markets again.
January
A Greek haircut could go all the way
Greece seems to be very close to a deal on a voluntary debt rescheduling, which could be announced later this week.
EU summit is mostly work in progress
Three topics are worth mentioning about the EU summit Monday
Euro PMI’s point to stable ECB rates
Euro area PMI's surprised on the upside - driven by Germany.
Euro sovereign downgrades – a crisis accelerator
France and Austria’s top AAA ratings fell victim of the sovereign debt crisis Friday night, when S&P downgraded nine of 16 Euro countries.
Fixed Income Update – Beware of Collateral Crunch
The continuous downgrade of strong rated issuers is making high quality collateral a scarce resource.
Euro area turnaround on the way?
Making a case for why an improvement could be lurking beneath the fog of doom and gloom.
December
Cross Currency Basis Swap – Spread Narrowing in 2012
Taking the temperature of the cross currency basis swap market following the coordinated central bank actions to ease money market tensions.
Outlook 2012 – kill or cure
Another year is over – a new year is beginning, and kill or cure will be the theme for 2012.
November
Chief Economist’s Corner – Who will foot the bill now?
Just like the Jasmine revolution has overthrown regime after regime in the Arab world, the sovereign debt crisis is weeding out in European politics.
Italy – where Europe meets its Waterloo?
Nordea's Chief Analyst on the euro area presents his view on the latest developments in the European debt crisis.
Only the ECB can help – stay low risk
• Future path of Greece and sovereign debt crisis highly uncertain • Only the ECB can comfort markets via committed bond purchases – directly or indirectly • Stay in the inner AAA-space, long duration, curve flatteners and long spread-over
October
Euro area inflation stays high – unemployment points to ECB rate cut
Euro area inflation suprised on the upside in October, but we still think that most of the economic key figures are pointing towards an ECB rate cut in December. Not least the Euro area unemployment data for September, released today.
Euro area PMI’s support the case for ECB rate cuts
Flash PMIs for the Euro area support our expectation of a 25bp cut in the ECB’s refi-rate before the end of the year.
Euro area PMI’s support the case for ECB rate cuts
Flash PMIs for the Euro area support our expectation of a 25bp cut in the ECB’s refi-rate before the end of the year.
September
Breaking up is hard to do – and still unlikely in the Euro area
The Euro area debt crisis roils financial markets once again. Is a break up of the Euro area imminent or is the stand-off between Greece and Germany just another thorny step on the road? We take a look at consequences for financial markets.
FI Update: What to make of the Greek tragedy and the Fed debate?
In the late European session on Friday, the Spiegel story that Greece was considering leaving the Euro sent jitters through financial markets.
August
Allocation Update: Central bank rescue to help only gradually
Central bank rescue to help only gradually. The past couple of months have clearly brought a turn for the worse in two respects.
July
Euro-zone leaders show courage – risk-on
Euro-zone leaders finally managed to show courage yesterday, and make tough decisions. Central in the decisions is an empowering of the EFSF/ESM with new mandates that strongly helps reducing the risk of contagion.
June
Allocation Update: Careful as growth worries are testing
Slowing growth is increasingly putting downward pressure on asset prices and bond yields.
May
Allocation Update: Inflation fears recede temporarily
Inflation and rate hike fears have backed down in the past month, but with the economy continuing on the recovery track we think the retracement is just temporary.
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Can’t fall asleep without short CHF @1.2520
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Swedish FSA implements a risk weight floor of 15 percent for Swedish mortgages. Another nail in the coffin.
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RT @edgarsrinkevics: AirBaltic flight from Amsterdam to Riga is delayed because of cat who has arrived from Riga and refused to disembark the plane #Ilovemyjob:)
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Dudley ‘sees risk investors could over-react to normalization.’ Oh, like they have overreacted to the abnormalization? #Fed
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What a waste of a slide #Fed http://t.co/sawnYKLzZ8
