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Daily Archives: 14th June 2018

14th June 2018

The end of an era

MARKET CLOSE:
iTraxx Main

65.5bp, -3.5bp

iTraxx X-Over

291.6bp, -7bp

🇩🇪 10 Yr Bund

0.43%, -5bp

iBoxx Corp IG

B+125.2bp, -1.6bp

iBoxx Corp HY

B+376.6bp, +1bp

🇺🇸 10 Yr US T-Bond

2.94%, -4bp

🇬🇧 FTSE 100

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🇩🇪 DAX

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🇺🇸 S&P 500

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Goldilocks ECB policy…

Well, that was a surprise. They’ve gone and done it. QE is all over at the end of this year and the €30bn monthly asset purchases fall to €15bn per month through the final quarter. However, rates are expected to remain unchanged until after next summer, reflecting a fairly dovish posture. And it was rate policy what won the day. The euro took a tumble. They should continue to reinvest the maturing proceeds (which means around €4bn per month in corporate purchases, if all proceeds reinvested) once QE ends – although Draghi was non-committal.

The door is left open for extending all areas of accommodative policy when looking more closely at the nuances in the language, but the signal regards their ultimate intentions was clear enough. The market was strangely unmoved by it, save for volatility around the euro. The Bund was better bid, equities edged a little higher and a stronger euro versus the dollar turned to weakness on the news. Credit perked up as the pipeline grew some more, the cost to insure credit fell and cash spreads moved tighter.

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