Euro Inflation Research #1 How the ECB makes its inflation projections
|
|
- Bryce Gallagher
- 6 years ago
- Views:
Transcription
1 Investment Research General Market Conditions 24 February 2014 Euro Inflation Research #1 How the ECB makes its inflation projections Mario Draghi has hinted that the new 2016 forecasts due to be published at the ECB meeting will prove instrumental in near-term policy decisions. This renders the question of what inflation outlook the ECB staff will put forward pertinent. Here we consider the ECB projection procedure including key forecasting model properties. In four upcoming documents we intend to consider what to expect of the 2016 staff projections and in turn the likely policy reaction. The ECB makes its projections by use of econometric models, which following a shock by definition will return to target/steady state in the longer term. How long this adjustment process lasts depends on the type of shock. In this paper we investigate two types of shocks. The first is a supply shock, which is a key factor in the ongoing fall in headline inflation. In this case it takes around two years before inflation is back to target. Euro inflation research 1. How the ECB makes its inflation projections, 24 February 2. ECB s current inflation forecast, 25 February 3. ECB s medium-term outlook for inflation, 26 February 4. ECB s reaction function, 27 February 5. ECB will ease again, 28 February The second shock studied is a complex negative demand shock, which reflects a demand and government consumption shock mainly in peripheral countries. The conclusion is that it takes longer than two years before inflation is back to target. Although the models may seem abstract, it is important to realise that when forecasting medium term inflation these types of models form the foundation for ECB. Role of projections within the monetary policy strategy The ECB generally describes its use of its economic projections as follows Projections play an important but not all-encompassing role in the ECB s monetary policy strategy. At the ECB meeting in February, Draghi described the decision not to act as due to lack of information and underlined the importance of the 2016 projections for future policy decisions as he said these forecasts are a very significant change in our analysis, a significant change in the information set that we use for our analysis. What are the drivers of inflation? CPI Core Food & energy Output gap Import prices Commodity demand Commodity supply National growth Long-term inflation expectations Global (EM) growth Senior Analyst Christin Tuxen tux@danskebank.dk Structural reforms Source Danske Bank Markets Fiscal policy Monetary policy/credit Productivity Demography Analyst Pernille Bomholdt Nielsen perni@danskebank.dk Important disclosures and certifications are contained from page 5 of this report.
2 That communication shows that the ECB is very focused on the medium-term outlook and it could indicate that it will abstain from easing again, if inflation is set to return towards the 2% target in 2016 even if inflation remains far below the objective in the short term. Thus, the question of what inflation forecast the ECB staff will put forward is very pertinent. Moreover, the projection for 2016 can be used as a way of strengthening the ECB s forward guidance. ECB inflation projections a mix of models and judgement In A guide to Eurosystem staff macroeconomic projection exercises, the ECB sketches the forecasting process that ECB staff go through four times a year 1. Essentially, this process has three steps. Setting underlying assumptions on interest rates, exchange rates, commodity prices, international developments and fiscal variables (see box below). The national central banks make initial projections for their own country, while the ECB staff separately prepare projections for the individual countries and the aggregated euro area. The projections are derived using a combination of economic indicators, model projections and judgmental assessments. Preparing the report for the Governing Council. ECB s underlying forecast assumptions The provisional assumptions set in the first step largely condition the analysis on market expectations for the variables in question. Commodity prices: The oil and non-energy commodity prices are based on the future market. Interest rates: The assumption about short-term interest rates is of a purely technical nature, whereas long-term interest rates are projected in line with market expectations. Exchange rates: Bilateral exchange rates are set in line with recent values and assumed to remain constant over the projection horizon. Fiscal variables: The fiscal policy assumption is based on individual euro area countries prevailing national budget plans and include only policy measures that have been approved by national parliaments. Source: A guide to Eurosystem staff macroeconomic projection exercises Properties of ECB s econometric model In deriving the projections, the ECB staff make use of a range of conjunctural and econometric models. The former includes various methods of assessing the current and future stance of the business cycle using, for example, coincident and leading indicators. Importantly, they also employ medium- to large-scale econometric models and these are likely to play a bigger role in pinning down the forecasts the longer the forecast horizon. Hence, the features of these might play a non-negligible role for the upcoming 2016 projections. The models are typically structural in nature, implying that certain fundamental economic relationships are assumed to hold in the longer run. Two such econometric models likely to play a prominent role in arriving at 2016 forecasts are the New Area Wide Model (NAWM) and the New Multi Country Model (NMCM); the latter is essentially a five-country version of the former, with largely the same underlying properties as its area-wide version. Both models are DSGE type in nature, meaning they are based on assumptions at the micro level regarding economic behaviour 1 In June and December, the ECB publishes the Eurosystem staff macroeconomic projections, while in March and September the forecasts are complemented by the ECB staff. The techniques used in the ECB staff projections are consistent with those of the Eurosystem staff projections described here February
3 of firms and households and set to converge in the longer run to an equilibrium determined by supply-side factors. Although this implies that inflation is forced to return to target relatively quickly in the face of shocks, the model at the same time incorporates some sluggishness in price-wage formation. The NAWM supersedes the previously employed Area Wide Model (AWM), which is a traditional large-scale macro-econometric model with a range of error-correction features (similar in type to, for example, the MONA model of Danmarks Nationalbank). Compared with the (old) AWM, the NAWM adheres more strictly to theoretical (rather than empirical) relationships, which make, for example, inflation potentially return to target more rapidly. In order to gauge what the model suggests in terms of inflation and the implied policy reaction, we consider a positive supply shock and a (somewhat complex) negative demand shock. A positive supply shock We first look at the model-implied effects of a transitory (positive) technology shock. This is arguably not too far from capturing a key feature of the positive supply shock that we have previously argued is a key factor behind the ongoing fall in headline inflation on a global scale and which derives largely from a production boom in the energy sector (see, for example, Deflation is not always a bad thing and FX Top Trades 2014). As discussed in ECB Working Paper no. 944, a temporary positive technology shock causes real marginal costs to fall and thus induces a fall in domestic prices. We note that this shock boosts GDP but weighs on employment as the shock increases labour productivity. Two factors limit the need for the central bank to cut rates in this case. First, real interest rates rise in the short term due to the fall in inflation and mitigate the rise in domestic demand. Second, currency depreciation lifts the prices of imported goods. Both forces partly counteract the fall in inflation and, in this scenario, a 0.2pp fall in consumerprice inflation requires the nominal interest rate, set by the central bank, to be lowered by little more than 0.05pp. Notably, within the model it takes around two years before inflation is back to target. (Note in the charts below real GDP is measured in percentage deviation from model steady state, while inflation and interest rates are measured as annualised percentage-point ). Supply shock effects on: real GDP CPI inflation Nominal interest rate (set by the central bank) Note; Measured in percentage deviations from model steady state 3 24 February
4 Complex negative demand shock The current eurozone disinflation is not purely supply driven however: a key factor behind the fall in core inflation relates to ongoing adjustments in wages and prices in peripheral countries. This type of shock is arguably somewhat more complex than the model allows for and may be characterised as an uneven combination of a demand shock, a cost-push shock and a government consumption shock all in a negative direction. Indeed, activity/wages/prices are declining as a result of a structural adjustment process fuelled not least by a fall in government consumption. The non-straightforward nature of the shock driving down core inflation and that it is directly relevant only for a limited set of euro area countries makes it difficult to address within the NAWM. However, what we can say is that a shock to government consumption generally leads inflation to deviate from target for longer than two years despite a negative shock and induced disinflation forcing the central bank to cut rates; one reason is that in this case both GDP and employment are adversely affected (contrasting with the technology shock above), reinforcing deflationary effects. Note the model scenario depicted below shows a positive government consumption shock (and signs must be reversed for our purpose). Fiscal shock effects on: real GDP CPI inflation Nominal interest rate Note: Measured in percentage deviations from model steady state It should be kept in mind that the model-implied scenarios sketched above are very stylised in nature and should not in any case be viewed as a straight guide to a likely ECB reaction to falling inflation. That said, to sum up, on the one hand, the supply side of the disinflation story suggests the ECB may see inflation return to target relatively quickly at least to the extent that the shock is temporary (which it may not be if one believes in a continued slide in commodity prices for years to come as we do). On the other hand, the demand part of the story suggests it may take much longer than two years for inflation to revert to target at least in the periphery in the absence of a significant ECB reaction. We plan to discuss the implications of this for the ECB s likely medium-term outlook for inflation in an upcoming document titled ECB s medium-term outlook for inflation. To the extent that the Governing Council is worried about a continued fall in commodity prices (as we expect) and/or about the likely prolonged impact (according to the NAWM) of the structural adjustments deriving from a negative fiscal shock, then ECB action is pertinent. However, Draghi may be relatively complacent in this respect, as he has said much of the decline in core inflation, actually comes from the four programme countries...this would signal more of a relative price adjustment than of a deflation phenomenon. We will discuss this in the documents we plan to publish this week February
5 Disclosures This research report has been prepared by Danske Bank Markets, a division of Danske Bank A/S ( Danske Bank ). The authors of this research report are Christin Tuxen, Senior Analyst, and Pernille Bomholdt Nielsen, Analyst. Analyst certification Each research analyst responsible for the content of this research report certifies that the views expressed in the research report accurately reflect the research analyst s personal view about the financial instruments and issuers covered by the research report. Each responsible research analyst further certifies that no part of the compensation of the research analyst was, is or will be, directly or indirectly, related to the specific recommendations expressed in the research report. Regulation Danske Bank is authorised and subject to regulation by the Danish Financial Supervisory Authority and is subject to the rules and regulation of the relevant regulators in all other jurisdictions where it conducts business. Danske Bank is subject to limited regulation by the Financial Conduct Authority and the Prudential Regulation Authority (UK). Details on the extent of the regulation by the Financial Conduct Authority and the Prudential Regulation Authority are available from Danske Bank on request. The research reports of Danske Bank are prepared in accordance with the Danish Society of Financial Analysts rules of ethics and the recommendations of the Danish Securities Dealers Association. Conflicts of interest Danske Bank has established procedures to prevent conflicts of interest and to ensure the provision of highquality research based on research objectivity and independence. These procedures are documented in Danske Bank s research policies. Employees within Danske Bank s Research Departments have been instructed that any request that might impair the objectivity and independence of research shall be referred to Research Management and the Compliance Department. Danske Bank s Research Departments are organised independently from and do not report to other business areas within Danske Bank. Research analysts are remunerated in part based on the overall profitability of Danske Bank, which includes investment banking revenues, but do not receive bonuses or other remuneration linked to specific corporate finance or debt capital transactions. Financial models and/or methodology used in this research report Calculations and presentations in this research report are based on standard econometric tools and methodology as well as publicly available statistics for each individual security, issuer and/or country. Documentation can be obtained from the authors on request. Risk warning Major risks connected with recommendations or opinions in this research report, including a sensitivity analysis of relevant assumptions, are stated throughout the text. Date of first publication See the front page of this research report for the date of first publication. General disclaimer This research has been prepared by Danske Bank Markets (a division of Danske Bank A/S). It is provided for informational purposes only. It does not constitute or form part of, and shall under no circumstances be considered as, an offer to sell or a solicitation of an offer to purchase or sell any relevant financial instruments (i.e. financial instruments mentioned herein or other financial instruments of any issuer mentioned herein and/or options, warrants, rights or other interests with respect to any such financial instruments) ( Relevant Financial Instruments ). The research report has been prepared independently and solely on the basis of publicly available information that Danske Bank considers to be reliable. While reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and Danske Bank, its affiliates and subsidiaries accept no liability whatsoever for any direct or consequential loss, including without limitation any loss of profits, arising from reliance on this research report February
6 The opinions expressed herein are the opinions of the research analysts responsible for the research report and reflect their judgement as of the date hereof. These opinions are subject to change, and Danske Bank does not undertake to notify any recipient of this research report of any such change nor of any other changes related to the information provided in this research report. This research report is not intended for retail customers in the United Kingdom or the United States. This research report is protected by copyright and is intended solely for the designated addressee. It may not be reproduced or distributed, in whole or in part, by any recipient for any purpose without Danske Bank s prior written consent. Disclaimer related to distribution in the United States This research report is distributed in the United States by Danske Markets Inc., a U.S. registered broker-dealer and subsidiary of Danske Bank, pursuant to SEC Rule 15a-6 and related interpretations issued by the U.S. Securities and Exchange Commission. The research report is intended for distribution in the United States solely to U.S. institutional investors as defined in SEC Rule 15a-6. Danske Markets Inc. accepts responsibility for this research report in connection with distribution in the United States solely to U.S. institutional investors. Danske Bank is not subject to U.S. rules with regard to the preparation of research reports and the independence of research analysts. In addition, the research analysts of Danske Bank who have prepared this research report are not registered or qualified as research analysts with the NYSE or FINRA but satisfy the applicable requirements of a non-u.s. jurisdiction. Any U.S. investor recipient of this research report who wishes to purchase or sell any Relevant Financial Instrument may do so only by contacting Danske Markets Inc. directly and should be aware that investing in non- U.S. financial instruments may entail certain risks. Financial instruments of non-u.s. issuers may not be registered with the U.S. Securities and Exchange Commission and may not be subject to the reporting and auditing standards of the U.S. Securities and Exchange Commission February
Euro Inflation Research #2 ECB s core inflation forecast is too optimistic
Investment Research General Market Conditions 6 March 2015 Euro Inflation Research #2 ECB s core inflation forecast is too optimistic The ECB yesterday published new inflation forecasts, including the
More informationEuro inflation research #3 Time to position for higher inflation
Investment Research General Market Conditions 11 March 2015 Euro inflation research #3 Time to position for higher inflation We see value in positioning for higher inflation especially after the oil price
More informationEuro inflation research #1 Inflation to increase sharply this year
Investment Research General Market Conditions 05 March 2015 Euro inflation research #1 Inflation to increase sharply this year Euro inflation surprised on the upside in February and consequently we revise
More informationECB research #1 ECB s growth projection, economic slack and credit supply
Investment Research General Market Conditions 22 May 2014 ECB research #1 ECB s growth projection, economic slack and credit supply We expect the ECB to lower its GDP growth projection for 2014 as growth
More informationEuro area fundamentals #1 Potential growth important for bond yields
Investment Research General Market Conditions 1 June 2015 Potential growth important for bond yields Bond yields have been driven by ECB flows in 2015 and it seems evident that fundamentals have had a
More informationMonitor Euro area deflation
Investment Research General Market Conditions 17 July 2014 Euro area deflation Inflation outlook Euro inflation remained very low at 0.5% in June and is still far below the ECB s target. In response, the
More informationMonitor Euro area credit monitor
Investment Research General Market Conditions 26 November 2014 Monitor Euro area credit monitor Credit growth outlook The latest improvements in euro-area bank lending are expected to continue. The progress
More informationEuro area outlook for 2015
Investment Research General Market Conditions 14 January 2015 Euro area outlook for 2015 Deflation but the good kind The euro area slipped into deflation in December 2014 and we expect the inflation rate
More informationFlash Comment ECB preview: Still pressure from low inflation
Investment Research General Market Conditions 8 January 2014 Flash Comment ECB preview: Still pressure from low inflation Euro inflation has declined again and core inflation is at an all-time low. This
More informationPeriphery research: Greece Signs of improvement compared to the recovery in Latvia
Investment Research General Market Conditions 15 August 2014 Periphery research: Greece Signs of improvement compared to the recovery in Latvia Latvia s economy went into free fall in H2 07 but due to
More informationResearch Pent-up demand in investments could boost euro area growth
Investment General Market Conditions 3 September 2013 Pent-up demand in investments could boost euro area growth The euro area has finally moved out of recession and at this stage pent-up demand could
More informationECB preview Dovish and slightly worried
Investment Research General Market Conditions 27 August 2015 ECB preview Dovish and slightly worried Main focus on the drop in 5Y5Y inflation expectations that are again far below the ECB s 2%-target The
More informationFlash Comment Is renewed surge in credit forcing PBoC to tighten further?
Investment Research General Market Conditions 18 February 2014 Flash Comment Is renewed surge in credit forcing PBoC to tighten further? Today, for the first time since June 2013, the Peoples Bank of China
More informationECB Research Draghi reveals favourable TLTRO details
Investment Research General Market Conditions 4 July 2014 ECB Research Draghi reveals favourable TLTRO details The ECB has provided additional details about the targeted LTRO (TLTRO) announced at its meeting
More informationFlash Comment ECB preview: Another refi rate cut
Investment Research General Market Conditions 4 February 2014 Flash Comment ECB preview: Another refi rate cut At the ECB meeting last month, Mario Draghi described two scenarios that would lead to action.
More informationGlobal Inflation. Set to surprise on the upside lifting long-dated inflation pricing. 27 October /
Global Inflation Set to surprise on the upside lifting long-dated inflation pricing Pernille Bomholdt Henneberg Mikael Olai Milhøj Senior Analyst, Euro area macro research Senior Analyst, US and UK macro
More informationDKK: Foreign ownership share of government bonds at post-crisis high
DKK: Foreign ownership share of government bonds at post-crisis high Jens Nærvig Pedersen Analyst Danske Bank Markets jenpe@danskebank.dk +45 45 12 80 61 28 July2014 Important disclosures and certifications
More informationResearch: Denmark Danish independent rate hike has moved closer
Investment Research 17 December 215 Research: Denmark Danish independent rate hike has moved closer After the December ECB meeting we have seen a new currency outflow from Denmark, and we now forecast
More informationFlash Comment China drafts plan for Tobin tax on FX transactions implications and recommendations
Investment Research General Market Conditions 16 March 2016 Flash Comment China drafts plan for Tobin tax on FX transactions implications and recommendations What s the plan? According to sources close
More informationECB Research ECB cutting through the lower bound Danish experiences
Investment Research General Market Conditions 03 November 2015 ECB Research ECB cutting through the lower bound Danish experiences Given the turnaround in the ECB s view on deposit rate cuts, we expect
More informationNorges Bank Review Unchanged rates and neutral bias maintained
Investment Research General Market Conditions 16 March 2017 Norges Bank Review Unchanged rates and neutral bias maintained As expected, Norges Bank (NB) this morning left the sight deposit rate unchanged
More informationMonitor Chinese credit crunch
Investment Research General Market Conditions 15 September 2014 Monitor Chinese credit crunch Credit growth continued to slow in August. The broad credit measure total social finance (TSF) slowed to 15.3%
More informationNorges Bank Review. Unchanged but September cut still in store. 23 June Follow us on
Norges Bank Review Unchanged but September cut still in store Frank Jullum Chief Economist +47 85 40 65 40 fju@danskebank.dk Kristoffer Kjær Lomholt Analyst +45 45 12 85 29 klom@danskebank.dk 23 June 2016
More informationResearch Iceland: Recovery in uncertain times
Investment Research General Market Conditions 12 April 2011 Research Iceland: Recovery in uncertain times The Icelandic economy is now recovering after the collapse of the Icelandic banking sector in October
More informationNorges Bank Review 24 September 2015
Norges Bank Review 24 September 2015 A 25bp rate cut and an easing bias Frank Jullum Chief Analyst fju@danskebank.dk www.danskebank.com/research Arne Lohmann Rasmussen Chief Analyst klom@danskebank.dk
More informationCommodities Research What if Iran s oil returns to the market?
Investment Research General Market Conditions 2 November 213 Commodities Research What if Iran s oil returns to the market? Momentum seems to be growing in talks over Iran s nuclear programme as negotiations
More informationPeriphery research: Ireland
Investment Research General Market Conditions 12 August 2014 Periphery research: Ireland Virtuous cycles supported by credit rating upgrades The strong Irish growth performance was confirmed in Q1 and
More informationCovered Bonds Update LCR-induced rally has run its course
Investment Research 14 October 2014 Covered Bonds Update LCR-induced rally has run its course Last Friday, the European Commission (EC) published details on the treatment of covered bonds in the upcoming
More informationFX Edge Rules or discretion? A look at past rate hikes in Denmark
Investment Research General Market Conditions 8 January 2019 FX Edge Rules or discretion? A look at past rate hikes in Denmark We look at 14 unilateral rate hikes in Denmark since 1999 to draw a picture
More informationStrategy The big EUR curve flattening has started
Investment Research General Market Conditions 18 January 2018 Strategy The big EUR curve flattening has started It has been a rocky past month for both the US and the European fixed income market, as 10Y
More informationInvestment Research General Market Conditions 3 December Dec HICP (flash est. 0.1%) LTRO1 matures
Investment Research General Market Conditions 3 December 214 ECB preview ECB s timeline is tricky isn t it? The ECB has eased twice in 214, but liquidity conditions in the Euro system will still be balancing
More informationBoJ Preview BoJ set to meet high expectations
Investment Research General Market Conditions 27 July 2016 BoJ set to meet high expectations We expect the Bank of Japan (BoJ) to cut its policy rate by 20bp to -0.3% and expect additional qualitative
More informationResearch US The subtle push for price level targeting continues
Investment Research General Market Conditions 03 January 2018 The subtle push for price level targeting continues DANSKE BANK NEW RESEARCH WEBSITE: We have launched our new research website with all our
More informationMonitor Chinese credit crunch
Investment Research General Market Conditions 28 January 2014 Monitor Chinese credit crunch Most of our indicators for credit risk including the swap-government bond spread, the spread between onshore
More informationDKK: foreign investors bought government bonds and treasury bills in August
DKK: foreign investors bought government bonds and treasury bills in August Jens Nærvig Pedersen Analyst Danske Bank Markets jenpe@danskebank.dk +45 45 12 8 61 27 September 213 Important disclosures and
More informationMonitor Chinese credit crunch
Investment Research General Market Conditions 26 August 213 Monitor Chinese credit crunch Credit expansion stabilised in July with seasonally adjusted new credit expanding CNY1.trn after increasing CNY.8trn
More informationNegative deposit rates The Danish experience
Negative deposit rates The Danish experience Chief analyst Arne Lohmann Rasmussen +45 45 12 85 32 FX, Rates and Commodities Research November 2013 Investment Research Agenda the Danish experience Danish
More informationFlash Comment China holiday wrap-up: sentiment improving
Investment Research General Market Conditions 9 August 2016 Flash Comment China holiday wrap-up: sentiment improving Below is a brief summary of developments in China over the summer Chinese offshore stocks
More informationFX Strategy Prepare for removal of the EUR/CZK floor
Investment Research General Market Conditions 24 October 2016 FX Strategy Prepare for removal of the EUR/CZK floor The Czech National Bank (CNB) plans to exit its exchange rate floor to the euro in the
More informationDKK: Unchanged appetite for Danish bonds among foreign investors in September
DKK: Unchanged appetite for Danish bonds among foreign investors in September Jens Nærvig Pedersen Analyst Danske Bank Markets jenpe@danskebank.dk +45 45 12 8 61 28 October 213 Important disclosures and
More informationEuro area housing markets
Investment Research General Market Conditions 22 October 212 Euro area housing markets A temperature gauge The euro area housing market spans large differences, as shown in Danske Bank s Euro Area Housing
More informationResearch US Further downgrade of US debt likely in 2012
Investment Research General Market Conditions 1 August 11 Research US Further downgrade of US debt likely in 1 The recent years fast rise in US gross debt combined with a deterioration of economic outlook
More informationGrowth might show positive surprise
Baltic Outlook Growth might show positive surprise Violeta Klyvienė Senior Baltic Analyst +370 5 2156992, +370 611 24354 April 2011 vkly@danskebank.dk Important disclosures and certifications are contained
More informationStrategy Slowing EM outflows to support euro, Scandi markets
Jan-5 Jun-5 Nov-5 Apr-6 Sep-6 Feb-7 Jul-7 Dec-7 May-8 Oct-8 Mar-9 Aug-9 Jan-1 Jun-1 Nov-1 Apr-11 Sep-11 Feb-12 Jul-12 Dec-12 May-13 Oct-13 Mar-14 Aug-14 Jan-15 Jun-15 Investment Research General Market
More informationVolatility in the money market is not unusual in June and December window dressing an important explanation
Investment Research General Market Conditions 2 July 213 Monitor Chinese credit crunch The surge in money market rates in June has created fears that China could be facing a severe credit crunch with substantial
More informationResearch Global Oil price to bottom when non-opec output rise halts déjà vu #2
Investment Research General Market Conditions 18 December 2014 Oil price to bottom when non-opec output rise halts déjà vu #2 We expect the current slide in oil prices to continue until we see producers
More informationFlash Comment China takes more steps to fight financial risks
Investment Research General Market Conditions 20 November 2017 Flash Comment China takes more steps to fight financial risks China stepped up the fight against the risks of shadow banking on Friday, announcing
More informationResearch Global inflation scare: Overview
Investment Research February Research Global inflation scare: Overview With the global recovery strengthening and commodity prices rising sharply, inflation has returned as a market theme. In a series
More informationECB Preview Time to fulfil the high expectations
Investment Research General Market Conditions 27 November 2015 Time to fulfil the high expectations We have changed our view and now expect the ECB to cut the deposit rate by 20bp (previously 10bp) accompanied
More informationECB Preview Time to fulfil the high expectations
Investment Research General Market Conditions 27 November 2015 ECB Preview Time to fulfil the high expectations We have changed our view and now expect the ECB to cut the deposit rate by 20bp (previously
More informationECB easing will it work? #2
Investment Research General Market Conditions 26 August 214 ECB easing will it work? #2 Liquidity and money market rates We expect the TLTROs will boost liquidity. However, the amount of borrowing limits
More informationResearch China A turn in construction to be a game changer
Investment Research General Market Conditions 31 March 2016 Research China A turn in construction to be a game changer The hard landing in Chinese construction looks set to be ending. We look for a gradual
More informationECB research Implications of the ECB easing measures
Investment Research General Market Conditions 5 June ECB research Implications of the ECB easing measures The ECB surprised the markets by boosting liquidity through a new 4Y targeted LTRO (TLTRO) while
More informationTrade Recommendation EUR rates: Pay 15Y15Y, Receive 2Y2Y EUR
Investment Research 9 July 2013 Trade Recommendation EUR rates: Pay 15Y15Y, Receive 2Y2Y EUR Pay 15Y15Y, Receive 2Y2Y EUR spread (vs 6M Euribor) Open ½ position @ 152bp with an option to open next ½ position
More informationFX Strategy USD/JPY is back in business - we target 114
Investment Research 11 September 2014 FX Strategy USD/JPY is back in business - we target 114 USD/JPY has recently broken the early 2014 high of 105.50 and is now back to 2008 levels. The upside break
More informationStrategy Bond yield conundrum vol. 2
Investment Research General Market Conditions 30 November 2017 Strategy Bond yield conundrum vol. 2 The big US curve flattening The big theme in the US fixed income market is the flattening of the yield
More informationGrexit what if? Don t expect any solution before the summer crunch time
Investment Research General Market Conditions 22 April 2015 Grexit what if? Don t expect any solution before the summer crunch time Main scenario: Greece remains in the euro We still expect Greece will
More informationECB s easing package and markets zig-zag
ECB s easing package and markets zig-zag Pernille Bomholdt Henneberg Jens Peter Sørensen Christin Tuxen Senior Analyst, Euro Macro Research Chief Analyst, Fixed Income Research Senior Analyst, FX Research
More informationResearch France begins to look like a peripheral country
Investment General Market Conditions 22 March 2013 France begins to look like a peripheral country The short-term outlook for France looks more like that of a peripheral country than the strong German
More informationECB preview: another minor hawkish twist
Investment Research General Market Conditions ECB preview: another minor hawkish twist Pernille Bomholdt Henneberg Jens Peter Sørensen Christin Tuxen Chief Analyst Chief Analyst Chief Analyst +45 45 13
More informationStrategy With fading EU political risks, global business cycle back in focus
Investment Research General Market Conditions 5 May 2017 Strategy With fading EU political risks, global business cycle back in focus Political risks in Europe fading for now Political risks in Europe
More informationReading the Markets Sweden
Investment Research - General Market Conditions 13 December 2012 Reading the Markets Sweden How weak is the Swedish economy really? Possible consequences for the curve Danske Banks market view in a nutshell
More informationFed s quantitative tightening details
Fed s quantitative tightening details Impact on the balance sheet and reinvestments Mathias Røn Mogensen Analyst, Fixed Income Research +45 45 13 71 79 mmog@danskebank.dk 19 June 2017 Investment Research
More informationInvestment Research General Market Conditions 24 February 2014
Investment Research General Market Conditions 24 February 2014 Finnair FY 2013 Finnair s fullyear 2013 result was burdened by a weak Q4 13 impacted by oneoff costs. Due to the divestment of assets reported
More informationResearch Denmark Danish households are resilient
Investment Research General Market Conditions 1 November 214 Research Denmark Danish households are resilient Danish household debt and the asset situation attract attention from time to time, as Danish
More informationWill the ECB be forced to re-enter the currency war?
Will the ECB be forced to re-enter the currency war? Pernille Bomholdt Henneberg Jens Peter Sørensen Christin Tuxen Senior Analyst, Euro Macro Research Chief Analyst, Fixed Income Research Senior Analyst,
More informationFixed Income Market Watch
Investment Research 9 April 2013 Fixed Income Market Watch Sweden Riksbank and Money Market Forecast repo rates given Riba pricing and Danske Bank Markets Repo Eff. Date Riba Diff. (bp) Danske Markets
More informationFixed Income Market Watch Sweden
Investment Research 4 March 2013 Fixed Income Market Watch Sweden Riksbank and Money Market Forecast repo rates given Riba pricing, Riksbank and Danske Bank Markets Repo Eff. Date Riba Diff. (bp) Riksbank
More informationFixed Income Market Watch
Investment Research 07 January 2013 Fixed Income Market Watch Sweden The Riksbank and Money Market Forecast repo rates given Riba pricing, Riksbank and Danske Bank Markets Repo Diff. Danske Bank Eff. Date
More informationPart 2: Eurozone Inflation Upside risks from oil prices and rising wage pressures
Investment Research General Market Conditions 27 February 2018 Part 2: Eurozone Inflation Upside risks from oil prices and rising wage pressures In this second document in our series, we focus on eurozone
More informationDONG Energy Hybrid exchange offer at significant discount
Investment Research General Market Conditions 10 June 2013 DONG Energy Hybrid exchange offer at significant discount Today DONG Energy announced that it has abandoned its plans to change the prospectus
More informationItaly under pressure but we expect the spread to core EU and the periphery to stabilise
Investment Research Italy under pressure but we expect the spread to core EU and the periphery to stabilise Jens Peter Sørensen Chief Analyst +45 45 12 85 17 jenssr@danskebank.dk 22 May 2018 www.danskebank.com/ci
More informationResearch US The outlook for US government debt
Investment Research General Market Conditions 3 September Research US The outlook for US government debt US net debt has risen fast during the recent recession, to more than from 36% in 7. Compared with
More informationSwedavia AB. Marketweight CREDIT & CORP BONDS RESEARCH. Q2 17: Good growth with high investments. Good growth with high investments
CREDIT & CORP BONDS RESEARCH Investment Research 17 August 2017 Swedavia AB Post-results Q2 17: Good growth with high investments Swedavia s revenues and earnings showed good growth in Q2, supported by
More informationStrategy US stalls while China and Europe strengthen
Investment Research General Market Conditions 18 October 2013 Strategy US stalls while China and Europe strengthen Once again US politicians struck a last-minute deal and once again fears were running
More informationNorges Bank preview A 25bp rate cut and easing bias
Investment Research 17 March 2015 Norges Bank preview A 25bp rate cut and easing bias We expect Norges Bank (NB) to deliver a 25bp rate cut on Thursday. NB is set to keep the easing bias by presenting
More informationNew yield forecast ECBs soft tone postpones expected tightening to 2011
Investeringsanalyse Marts New yield forecast ECBs soft tone postpones expected tightening to Latest market developments Generally speaking the economic data continue to point to a sustainable economic
More informationStatoil Q1 14: helped by weaker local currency
Investment Research 29 April 214 Statoil Q1 14: helped by weaker local currency Statoil delivered a good Q1 14 result from a credit perspective. Group entitlement production was unchanged y/y. Coupled
More informationBank of England Preview Waiting for Carney
Investment Research General Market Conditions 6 February 2013 Bank of England Preview Waiting for Carney We expect the Bank of England (BoE) to remain on hold at Thursday s Monetary Policy Committee (MPC)
More informationBrexit Monitor May is losing control over the Brexit process but no credible alternative has emerged yet
Investment Research General Market Conditions 11 January 2019 May is losing control over the Brexit process but no credible alternative has emerged yet The House of Commons went back to business this week
More informationIs the Phillips curve finally coming alive in 2019? Piet P.H. Christiansen Senior Analyst
Investment Research General Market Conditions Euro Area Research Is the Phillips curve finally coming alive in 2019? Aila Mihr Analyst +45 45 12 85 35 amih@danskebank.dk Piet P.H. Christiansen Senior Analyst
More informationYield Outlook 10Y Bund yields set to remain close to zero through 2019
Investment Research General Market Conditions 11 April 2019 10Y Bund yields set to remain close to zero through 2019 In the previous issue of, 13 March, we argued that the ECB would help keep short and
More informationResearch Rouble risk: more about the oil price than the geopolitics
Investment General Market Conditions 13 November 2014 Rouble risk: more about the oil price than the geopolitics The Russian central bank (CBR) has allowed the rouble to float increasingly freely since
More informationIn the euro area the trade balance for June will give insight into whether the end of the recession was driven by growth abroad.
Investment Research General Market Conditions 16 August 2013 Danske Daily Market movers today In the euro area the trade balance for June will give insight into whether the end of the recession was driven
More informationECB comprehensive assessment
Investment Research General Market Conditions 27 October 2014 Capital shortfall less than expected The result of the ECB s Asset Quality Review (AQR) and stress test, including the fact that 12 out of
More informationRoom for tighter asset swap spreads as issuance picks up
Room for tighter asset swap spreads as issuance picks up Senior Analyst Senior Analyst Peter Possing Andersen Lars Tranberg Rasmussen +45 4513 719 + 45 4512 8534 pa@danskebank.dk laras@danskebank.dk Trade
More informationStrategy What the US and Denmark had in common this week and what it means for global financial markets
Investment Research General Market Conditions 22 December 2017 Strategy What the US and Denmark had in common this week and what it means for global financial markets Denmark and US adopt expansionary
More informationStrategy Fed heading for the exit door
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 Investment Research General Market Conditions 16 June 2017 Strategy Fed heading for the exit door The most anticipated event this week was clearly
More informationECB Preview. Ready to scale back QE. 18 October 2017
Investment Research General Market Conditions ECB Preview Ready to scale back QE Aila Mihr Jens Peter Sørensen Morten Helt Analyst Chief Analyst Senior Analyst +45 45 12 85 35 +45 45 12 85 17 +45 45 12
More informationECB QE: Buxl/Bund tapering and step up in Ita/Fra/Spa
ECB QE: Buxl/Bund tapering and step up in Ita/Fra/Spa Pernille Bomholdt Henneberg Anders Møller Lumholtz Senior Analyst, Euro Area Macro Research Chief Analyst, Fixed Income Research +45 45 13 20 21/+44
More informationBrexit Monitor Vote on Tuesday is not the final word in the Brexit saga
Investment Research General Market Conditions 9 December 2018 Vote on Tuesday is not the final word in the Brexit saga The vote on PM Theresa May s Brexit deal takes place on Tuesday, 11 December at 20:00
More informationSwedavia AB. Marketweight CREDIT & CORP BONDS RESEARCH. Stable credit metrics. Corporate ticker: Equity ticker:
CREDIT & CORP BONDS RESEARCH Investment Research 31 October 216 Swedavia AB Post-results Q3 16: Stable metrics as passenger traffic increased Swedavia reported stable earnings and credit metrics for Q3.
More informationResearch Global business cycle moving lower
Investment Research General Market Conditions 19 April 2018 Research Global business cycle moving lower We see clear signs that the global business cycle has peaked in early 2018 in line with our expectations
More informationYield Outlook Range trading in 2017, but risk is skewed to the upside
Investment Research General Market Conditions 19 June 2017 Yield Outlook Range trading in 2017, but risk is skewed to the upside We continue to see further upside for 10Y German Bund yields on a 12-month
More informationGold in a policy normalisation phase August 2018
0.02 2.02.03 0.04 09.05 08.06 07.07 06.08 05.09 04.0 03. 02.2 0.3 2.3.4 0.5 09.6 08.7 Gold price (USD) Inflation Nowcaster (Z-score) PERSPECTIVES F O R P R O F E S S I O N A L I N V E S T O R S O N L Y
More informationVasakronan AB. Marketweight CREDIT & CORP BONDS RESEARCH. Healthy organic growth. Further decline in leverage. Profitability.
CREDIT & CORP BONDS RESEARCH Investment Research 5 May 2017 Post-results Vasakronan AB Q1 17: Healthy organic growth Vasakronan showed a good performance in Q1. Due to the current strong Swedish property
More informationGLOBAL ECONOMICS LONG-TERM OUTLOOK
Canada and US Long-Run Economic Outlook: 2018 23 Over the long run Canadian real GDP is expected to grow at 1.8 annually, reflecting relatively weak productivity and modest labour input growth, slightly
More informationMinutes of the Monetary Policy Council decision-making meeting held on 6 July 2016
Minutes of the Monetary Policy Council decision-making meeting held on 6 July 2016 At the meeting, members of the Monetary Policy Council discussed monetary policy against the background of macroeconomic
More informationQuarterly Currency Outlook
Mature Economies Quarterly Currency Outlook MarketQuant Research Writing completed on July 12, 2017 Content 1. Key elements of background for mature market currencies... 4 2. Detailed Currency Outlook...
More informationResearch. USA: Subprime mortgage market containment or contagion? March 30, Containment or contagion?
Research March, 2 Peter Possing Andersen, +4 44 26, pa@danskebankdk USA: Subprime mortgage market containment or contagion? Problems in the US subprime mortgage market have fuelled fears of a broader contagion
More information