ECB QE: Buxl/Bund tapering and step up in Ita/Fra/Spa
|
|
- Julius Rogers
- 6 years ago
- Views:
Transcription
1 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 / September 2016 Investment Research Important disclosures and certifications are contained from page 18 of this report.
2 ECB QE: Buxl/Bund tapering and step up in Ita/Fra/Spa We expect the ECB to keep its powder dry at the meeting tomorrow, as economic sentiment has been very resilient to the Brexit vote. The patient stance is further backed by the fact that inflation is set to rise sharply later this year; however, mainly driven by the oil price. That said, the ECB s main concerns are the lack of an upward trend in the underlying price pressure and the persistently low market-based inflation expectations. In our view, this will eventually trigger an extension of the QE purchases, to be announced either in October or at the December meeting. See ECB Preview: Still awaiting more information, 24 August QE extension implies that the ECB will be confined by its technical restrictions, making it difficult to proceed with purchases in all sovereigns - including Germany in early Our main scenario is that the ECB will do nothing' (no change in restrictions) in September or in Q4, despite the increased focus on the German bond scarcity. No change in the restrictions would involve less buying of the long end of Germany and a shift in purchases from DE/FI/PT/IE to countries with no binding restrictions. Hence, a de facto deviation from the capital key in DE/FI/PT/IE, causing 'tapering' in these countries while increasing purchases in the other countries. In this do nothing scenario, IT/FR/ES would tighten massively versus Germany, the German curve steepen and Buxl/Bund ASWs would tighten. Other possible ECB actions related to the QE restrictions would impact the EUR FI market differently. Buying below the deposit limit or lifting the issue/issuer limit would have significant implications for the EUR FI market curves and spreads. Switching from a capital key to an outstanding debt key would trigger a large repricing across sovereigns. 1
3 ECB QE: Buxl/Bund tapering and step up in Ita/Fra/Spa At tomorrow s meeting, other possible scenarios include the ECB creating a 'task force, which would look at relaxing current restrictions and announcing the change in Q4. The final announcement in Q4 is likely to involve flexibility on all current restrictions including the deposit restriction, the issue/issuer limit and possibly even deviations from the capital key. In addition, a black box' solution is possible, which would allow 'full flexibility' (release information afterwards). Current rules and restrictions could be used as a guidance but full flexibility could be allowed including the possibility to break all current restrictions, i.e. (1) the deposit rate restriction; (2) the issue/issuer limit; and (3) even deviate from the capital key. Despite the significant impact on the FI market, a changed purchase pattern will not change the ECB s inflation outlook. It is just a step on the way and would buy the ECB more time before other assets (Senior Financials, equity ETFs) could be included in Market pricing. During the past month, the German curve has steepened with the 2Y yield decreasing to -68bp. Buxl ASW has tightened around 15bp since Brexit. The price action suggests that the market is pricing in some probability of abandoning the deposit restriction and an outcome that implies less buying of the long end of Germany. Price action in cross sovereign spreads has been more muted, indicating a low market probability of a de facto deviation from the capital key. There is no clear consensus on the most likely outcome nor the timing of the announcement. It is our impression that the majority expects the ECB to introduce some flexibility in the QE purchases, including possibly combining some of the above options. 2
4 Sharp rise in inflation unlikely to prevent a later QE extension as the increase in inflation is driven mainly by the higher oil price Inflation set to rise sharply in coming months 2.00% Higher inflation is driven by the oil price 1.50% 1.00% Inflation market pricing is still significantly below our forecast 0.50% 0.00% Sep % Jul % The medium-term part of the curve is priced almost flat -0.50% -1.00% Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 HICP inflation Danske forecast Market pricing ECB Jun projection Source: Bloomberg, ECB, Eurostat, Danske Bank Markets Source: Eurostat, Danske Bank Markets 3
5 ECB concerned about the lack of upward trend in core inflation while low inflation expectations should also remain in focus ECB is concerned about low core inflation Will inflation ever reach the 2% target? Source: ECB, Eurostat, Danske Bank Markets Source: ECB, Eurostat, Danske Bank Markets 4
6 Change in QE (PSPP) purchase pattern
7 PSPP buying restrictions already affecting purchases in Por/Ire QE restrictions (issue/issuer cap) already causing reduced purchases (lower than capital key) in Portugal and Ireland. PSPP fraction remain very high PSPP increase more subdued in IE /PT EUR bn % 95 45% Apr-Aug purchases vs Q12016 average, % 40% % 30% 25% 40 20% % 20 10% % 0 0% % PSPP CBPP3 ABSPP CSPP PSPP share (rhs) Source: ECB, Danske Bank Markets Source: ECB, Danske Bank Markets 6
8 ECB QE running out of bonds/bunds/buxl? The deposit buying restriction (-40bp) has increased the average maturity in PSPP purchases in Germany from below 6Y in May-15 to 11Y Aug-16 ECB pushed further out on the curve Significant PSPP holdings already Marginal maturity (years) DE FI NL AT FR BE IE ES IT PT All Mar-15 May-15 Dec-15 Mar-16 Aug EUR bn DE FR IT ES NL BE AT PT FI IE Others Purchases end of Aug-16 Source (all): ECB, Danske Bank Markets We estimate that PSPP holdings of Germany 8Y-31Y will be approaching and maybe even hitting the 33% issue cap (isin) around Q1 17. Note, also non-monetary policy holdings are included in the issue cap. 7
9 ECB options what is most likely? ECB's options Market implications Slowdown in DE/FI/IE/PT and step-up in rest 30% Purchases in Portugal, Ireland, Finland and Germany will be reduced as they hit the 33% issue/issuer limit. The (a) 'Do nothing' (no change remaining countries will benefit from higher purchases in restrictions) - slowdown in that will be distributed using the capital key (ECB still purchases in buys EUR80bn per month). Hence, it is a 'de facto' Ger/Fin/Por/Ire due to deviation from the capital key in countries where issue/issuer caps being restrictions are causing 'tapering' while increases in other replaced with a step-up in countries will be distributed with the capital key. Ita/Fra/Spa etc. (according Italy/France and Spain will tighten significantly versus to the capital key) Germany. The German curve will steepen and Buxl/Bund ASW tighten. (b) Create a 'task force' that will look at relaxing current restrictions and announce change in Q4 (c) 'Black box' solution - 'full flexibility' (release information afterwards) (d) Keeping the current QE restrictions and include other assets Market talk on possible scenarios and market impact will intensify. The final decision is likely to involve flexibility on all of the current restrictions including the depo restriction, the issue/issuer limit and possibly even deviations from the capital key. Every comment from the ECB will be scrutinised for information. Market moves are likely to be less violent although some further Buxl ASW tigtning as long-end buying in Germany is likely to be reduced. Allow full flexibility and the possibility to break all current restriction, i.e. (1) the deposit rate restriction; (2) the issue/issuer limit; (3) even deviate from the capital key. We think that QE purchases in this scenario would be reduced in the long end of Germany. Hence, Buxl/Bund- ASW will tighten and also Ita/Spa/Fra are likely to tighten versus Germany due to the 'de facto' abandoning of the Capital Key. ECB has previously included new assets to the QE universe and continuing along these lines will have a smaller impact on FI markets but be more supportive for the outlook for inflation. 26.4% 25.8% 25% 22.4% 20.8% 20% 18.0% 16.1% 15% 13.2% 13.0% 10% 7.3% 5.9% 4.5% 5% 4.1% 3.6% 3.6% 2.9% 3.3% 2.6% 1.8% 1.3% 1.7% 0.9% 0.9% 0.0% 0.0% 0% Buying according to ECB capital key Capital key after 50% DE/FI/PT/IE reduction Source: ECB, Danske Bank Markets 8
10 (a) The ECB does nothing - de facto deviating the Capital Key A de facto deviation from the Capital Key The ECB recently concluded that implementation of the asset purchase programme had proceeded smoothly, notwithstanding market reports of emerging scarcity in some market segments. Hence, the ECB could continue without changing the QE restrictions but this would soon affect the purchase pattern. An issue/issuer-related slowdown in some countries (DE/FI/IE/PT) would mean an increase in other countries according to the capital key (IT/FR/ES) as the ECB would maintain the monthly purchases of EUR80bn. Deposits currently going mainly to core 35% 30% 25% 20% 15% 10% 5% 0% 30% 7% 15% 6% 5% 26% 3% Source: ECB, Danske Bank Markets 1% 2% 2% 0% 0% 1% 0% 0% 0% 1% 0% 0% DE FI NL LU AT FR BE IE ES IT PT GR CY EE LV LT MT SK SI Core 54% Deposits at national central bank in % of total Eurosystem deposits Semi-core 33% Periphery 6% Others 7% One possibility is that the ECB will create a task force to look at the issue and wait for a market consensus to be formed. 9
11 (b) The ECB keeps the restrictions but includes other assets to QE Not higher inflation by changing restrictions. Despite the significant impact on EUR FI markets, changing the QE restrictions would have a limited impact on the outlook for inflation, which is the most important for the ECB. The ECB previously expanded QE universe Including other assets such as senior financials or ETFs would have a much bigger impact on the economic outlook but this option would probably be more difficult for some Governing Council members to accept. However, the ECB previously expanded the QE universe to include new assets and the it does accept senior financials as collateral. Source: ECB, Danske Bank Markets 10
12 Several possible changes to QE restrictions and the market impact QE (PSPP) change Pros Cons Market implications (1) Removing the no buying below the -40bp deposit limit Would imply a large amount of bonds could be included in the PSPP. On the German curve, bonds out to 8Y are trading with a yield below -40bp (more than 60% of the German curve). Also, a substantial part of the other core market, supras and agencies is excluded due to this limitation. This restriction could result in losses for the Eurosystem as the ECB's effective 'funding cost' is the deposit rate at currently -40bp. Would push yields in the short end of core lower and cause substantial curve steepening as purchases in longer maturities decrease. Similarly, in ASW it would cause Bund and BUXL ASW tightening while 2Y is likely to widen. (2) Shifting from 'capital key' to an 'outstanding debt key' Would mean that the QE programme could proceed for longer with current buying restrictions as purchases would be biased towards sovereigns with higher debt levels. The fact that countries with a higher debt level would be rewarded with higher purchases is likely to be criticised by some Governing Council members. Would benefit Italy, France, Belgium and Austria at the expense of Germany, the Netherlands, Finland, Ireland and Portugal. Purchases in Spain would be around the current level. In ASW, it is likely to cause Bund ASW tightening - particularly in the 30Y, which has been most squeezed. Core curves are also likely to steepen on this. (3) Removing the 33% issue/issuer limit Would allow the QE programme to be extended further without hitting the issue/issuer limits. These restrictions were put in place to prevent the ECB from actively having to take a stance in the case of a new EGB haircut as was the case with, for instance, the Greek PSI. A 'low' holding would mean that the ECB could be CAC'ed into taking the same losses as other investors in a scenario with an orderly default; thereby not having to freely accept 'monetary financing' of euro area governments. Purchases in Portugal and to some extent also Ireland have already been reduced due to (most likely) these concerns. Hence, these would be the main beneficiaries. In the core, Germany/Finland could also benefit further from this. Bund and Buxl spreads could also widen further on this and the core curve flatten further in, for instance, the 5-30Y. (4) Removing maturity restrictions (sub 2Y and plus 31Y) (5) Removing the isin limit on non-cac bonds Would free some but very limited additional liquidity. Would allow higher purchases in 'off the runs' and thereby increase the eligible basket. The additional market liquidity in +31Y is very limited. Is likely to create 'kinky' points on EUR sovereign curves. Would cause performance in the ultra long segment across issues and also versus swaps. Off-the run non-cacs would outperform CACs bonds resulting in curves with kinks. Source: Danske Bank Markets 11
13 (1) Removing the limit of not buying below the -40bp deposit rate Pros. A large amount of bonds in core markets, supras and agencies would again be included in the PSPP. The German curve out to 8Y is trading with a yield below - 40bp (more than 60% of the curve). Cons. The Eurosystem could end up with losses as the ECB s effective funding cost is the deposit rate currently at -40bp. Markets. Lower short-end core yields causing a substantial curve steepening as purchases in longer maturities decrease. In ASW, it would cause Bund and Buxl ASW tightening while the 2Y is likely to widen. Of the German curve, 62% is below -40bp 1.40% 1.10% 0.80% 0.50% 0.20% -0.10% -0.40% Yield Years -0.70% Source: ECB, Danske Bank Markets 43 German bonds (+62% of MV) not eligible for PSPP (31 was excluded on 17 Apr yielding below -20bp) Germany government bonds (live) 17/04/2015 ECB deposit rate 12
14 (2) Shifting from capital key to outstanding debt key Pros. The QE programme could proceed for longer with an outstanding debt key, as purchases would be biased towards sovereigns with higher outstanding debt levels without violating other restraints. Cons. Countries with a high debt level would be rewarded with higher purchases, which is very likely to be criticised by some Governing Council members. Markets. Italy and France would benefit mainly at the expense of Germany. Spain would be unaffected (see chart to the right). In ASW, it would cause Bund ASW tightening, particularly in the 30Y, which has been the most squeezed. The German curve is likely to steepen on a bit on this. FR/IT to benefit most at the expense of DE 30% 26.4% 25% 24.3% 25.3% 20.8% 20% 18.0% 18.0% 15% 13.0% 12.3% 10% 5.9% 5.2% 5.5% 5% 3.6% 2.9% 3.4% 2.6% 3.3% 1.6% 1.8% 1.3% 1.7% 1.6% 1.5% 0.0% 0% Buying according to ECB capital key Buying according to outstanding debt Source (both charts): ECB, Macrobond, Bloomberg, Danske Bank Markets 13
15 (3) Removing (increasing) the 33% issue/issuer limit Pros. The QE programme could be extended beyond March 2017 without hitting the purchase restrictions. Cons. The ECB would have to actively take a stance in the case of a EGB haircut as, for example, the Greek PSI. A low holding would mean that the ECB could be CAC ed in to taking the same losses as other investors in a scenario with an orderly default and thereby not freely accepting monetary financing. Big dispersion in monthly purchases recently Monthly PSPP purchases - index 2015 average Markets. Purchases in Portugal and to some extent Ireland have already been reduced due to the issue/issuer restriction. Hence, they would benefit the most, with Germany and Finland. The Bund and Buxl spread would widen and the core curve flatten (5-30Y). Source: ECB, Danske Bank Markets Total Supra FR FI DE NE IE IT PT ES 14
16 (4) Removing the sub 2Y and plus 31Y maturity restrictions Pros. Some but very limited additional bonds could be purchased. Cons. The market liquidity in the +31Y is very limited. Markets. This would trigger performance in the ultra long segment of the curve across sovereigns and also versus swaps. Only 1% of outstanding debt is above 32Y EUR bn 0-2y 2-5y 5-10y 10-15y 15-20y 20-32y 32y+ Total Germany ,242 Finland Netherlands Austria France ,597 Belgium Ireland Spain Italy ,616 Portugal Other ,252 1,685 2, ,852 % of outstanding 0-2y 2-5y 5-10y 10-15y 15-20y 20-32y 32y+ Total Germany 24% 24% 25% 10% 3% 15% 0% 18% Finland 12% 33% 37% 11% 0% 7% 0% 1% Netherlands 22% 22% 27% 6% 4% 18% 0% 6% Austria 17% 20% 35% 8% 3% 14% 3% 4% France 15% 26% 31% 10% 7% 8% 4% 23% Belgium 17% 12% 33% 10% 13% 13% 1% 6% Ireland 6% 43% 38% 8% 0% 6% 0% 2% Spain 19% 26% 31% 9% 4% 11% 1% 13% Italy 19% 24% 29% 13% 5% 10% 0% 24% Portugal 17% 29% 39% 4% 0% 10% 0% 2% Other 15% 40% 29% 8% 7% 1% 0% 2% 18% 25% 30% 10% 5% 11% 1% 100% Source (both charts): Danske Bank Markets 15
17 (5) Removing the issue limit on non-cac bonds Pros. Higher purchases in off the runs and thereby increasing the eligible basket of assets. Cons. This is likely to create kinky points on EUR sovereign curves. Markets. Off-the-run non-cac bonds would outperform CAC bonds, resulting in curves with kinks. CAC vs non-cac across countries % CAC of outstanding in maturity bracket 0-2y 2-5y 5-10y 10-15y 15-20y 20-32y Germany 46% 41% 69% 8% 0% 18% Finland 0% 36% 64% 36% #N/A 0% Netherlands 32% 37% 66% 0% 0% 26% Austria 0% 29% 38% 37% 100% 7% France 21% 35% 40% 37% 9% 24% Belgium 17% 0% 48% 22% 15% 47% Ireland 0% 0% 63% 100% #N/A 100% Spain 33% 49% 64% 60% 0% 29% Italy 50% 39% 51% 29% 30% 33% Portugal 0% 0% 80% 100% #N/A 26% Total 36% 37% 54% 32% 18% 27% Source: Danske Bank Markets 16
18 Market impact: most scenarios have Bund/Buxl ASW tightening and curve steepening (if QE extension is priced in) Bund and Buxl squeeze SHTZ, BOBL, BUND and BUXL ASW 6M, bp Long-end ASW likely to come lower in most scenarios German ASW 6M curve, bp SHTZ ASW 6m BOBL ASW 6m BUND ASW 6m BUXL ASW 6m Current curve (07-Sep-16) Curve (01-Apr-16) Curve (01-Sep-14) Curve (27-Jun-16) Curve (09-Mar-15) Source (both charts): Bloomberg, Macrobond Financial, Danske Bank Markets 17
19 Disclosures This research report has been prepared by Danske Bank Markets, a division of Danske Bank A/S ( Danske Bank ). The authors of the research report are Pernille Bomholdt Henneberg, Senior Analyst and Anders Møller Lumholtz, Senior 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 Finance Society s rules of ethics and the recommendations of the Danish Securities Dealers Association. Danske Bank is not registered as a Credit Rating Agency pursuant to the CRA Regulation (Regulation (EC) no. 1060/2009); hence, Danske Bank does not comply with or seek to comply with the requirements applicable to credit rating agencies. Any ratings are provided as part of an investment research product and do not equate with ratings produced by Credit Rating Agencies. Conflicts of interest Danske Bank has established procedures to prevent conflicts of interest and to ensure the provision of high-quality 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. Danske Bank is a market maker and may hold positions in the financial instruments mentioned in this research report. Danske Bank, its affiliates and subsidiaries are engaged in commercial banking, securities underwriting, dealing, trading, brokerage, investment management, investment banking, custody and other financial services activities, may be a lender to the companies mentioned in this publication and have whatever rights are available to a creditor under applicable law and the applicable loan and credit agreements. At any time, Danske Bank, its affiliates and subsidiaries may have credit or other information regarding the companies mentioned in this publication that is not available to or may not be used by the personnel responsible for the preparation of this report, which might affect the analysis and opinions expressed in this research report. See for further disclosures and information. 18
20 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. 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, and may not be redistributed to, 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 was created by Danske Bank A/S and is distributed in the United States by Danske Markets Inc., a U.S. registered broker-dealer and subsidiary of Danske Bank A/S, 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. 19
Investment 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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: 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 informationEuro Inflation Research #1 How the ECB makes its inflation projections
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
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 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 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 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 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 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 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 informationThe Eurosystem s asset purchase programme
Katja Hettler Lia Cruz Monika Znidar Euro Area Bond Markets Section DG-Market Operations The Eurosystem s asset purchase programme ECB Central Banking Seminar Frankfurt, 13 July 2018 Rubric The Eurosystem
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 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 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 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 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 informationWhat if Swedish Housing Prices Drop 15-20%?
Investment Research What if Swedish Housing Prices Drop 15-20%? - The housing market poses a risk to Swedish growth and the inflation outlook - The krona is feeling the pain but rates market yet to adjust
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 informationScenario for the European Insurance and Occupational Pensions Authority s EU-wide insurance stress test in 2016
17 March 2016 ECB-PUBLIC Scenario for the European Insurance and Occupational Pensions Authority s EU-wide insurance stress test in 2016 Introduction In accordance with its mandate, the European Insurance
More informationScandinavia - Land of the true AAA s. Anders Møller Lumholtz Senior Analyst August 2013
Scandinavia - Land of the true AAA s Anders Møller Lumholtz Senior Analyst andjrg@danskebank.dk August 2013 Strong balances: Fiscal and external balances are very solid Budget bal, % of GDP CA bal. (%
More informationEconomic outlook and issuers' perspectives on the covered bonds market. Michael Schulz Head of Fixed Income Research
Economic outlook and issuers' perspectives on the covered bonds market Michael Schulz Head of Fixed Income Research 1 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15
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 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 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 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 informationDemand for sovereign bonds: The importance of diversity
Demand for sovereign bonds: The importance of diversity ECB Bond Market Contact Group 1 July 2014 Christoph Rieger, Head of Interest Rate and Credit Research, +49 69 136 87664 Key themes (1) Core: Investor
More information1.1. Low yield environment
1. Key developments The overall macroeconomic environment remains very challenging for the European insurance and pension sector. The yields have been further compressed and are substantially below the
More informationAdverse scenario for the European Insurance and Occupational Pensions Authority s EU-wide insurance stress test in 2018
9 April 218 ECB-PUBLIC Adverse scenario for the European Insurance and Occupational Pensions Authority s EU-wide insurance stress test in 218 Introduction In accordance with its mandate, the European Insurance
More informationThe ECB s Strategy in Good and Bad Times Massimo Rostagno European Central Bank
The ECB s Strategy in Good and Bad Times Massimo Rostagno European Central Bank The views expressed herein are those of the presenter only and do not necessarily reflect those of the ECB or the European
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 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 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 informationECONOMIC AND MONETARY DEVELOPMENTS
Box 2 RECENT WIDENING IN EURO AREA SOVEREIGN BOND YIELD SPREADS This box looks at recent in euro area countries sovereign bond yield spreads and the potential roles played by credit and liquidity risk.
More informationOctober 2010 Euro area unemployment rate at 10.1% EU27 at 9.6%
STAT//180 30 November 20 October 20 Euro area unemployment rate at.1% EU27 at 9.6% The euro area 1 (EA16) seasonally-adjusted 2 unemployment rate 3 was.1% in October 20, compared with.0% in September 4.
More informationReading the Markets Norway International political risk, in a slow domestic summer market, puts downward pressure on rates
Investment Research 16 July 2018 Reading the Markets Norway International political risk, in a slow domestic summer market, puts downward pressure on rates Macro: the domestic economy is still strong in
More informationRecent developments in the euro money market. Money Market Contact Group Frankfurt, 18 September 2012
Recent developments in the euro money market Money Market Contact Group Frankfurt, 18 September 2012 ECB developments and announcements I 5 July 2012 The ECB reduced by 25 basis points the interest rate
More informationEconomic and Monetary Policy Perspectives for Europe and the Euro Area
Economic and Monetary Policy Perspectives for Europe and the Euro Area Peter Mooslechner Executive Director and Member of the Governing Board Oesterreichische Nationalbank Roundtable Discussion, Austrian
More informationThe crisis response in the euro area. Peter Praet Pioneer Investment s Colloquia Series Beijing, 17 April 2013
The crisis response in the euro area Peter Praet Pioneer Investment s Colloquia Series Beijing, 17 April 213 Outline A. How the crisis developed B. Monetary policy response C. Structural adjustment underway
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 informationVítor Constâncio ECB Vice-President. Fragmentation and Rebalancing in the euro area
Vítor Constâncio ECB Vice-President Fragmentation and Rebalancing in the euro area Joint EC-ECB Conference on Financial Integration Brussels, 25 April 2013 Introduction Rubric In the first half of 2012,
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 informationEuro Rates Update. 26 February % 0.9% 0.8% 2.4% 0.7% 0.6% 2.2% 0.5% 0.4% 2.0% 0.3% 0.2% 1.8% 0.1% 0.0%
FI Strategy Euro Rates Update Nordea Research, 6 February 6 US Treasury Yields Y Y Y Y.7.8.7.6 D....7 W -.6 -. -.7 -. German Benchmark Yields Y Y Y Y -. -...8 D -. -..7. W -. -.8 -.8 -. German Curve Slopes
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 informationECB Research TLTRO - no longer our base case
Investment Research General Market Conditions 08 February 2019 TLTRO - no longer our base case TLTRO is not a done deal as the ECB needs a monetary policy justification to conduct another round. Such arguments
More informationEurozone. Economic Watch FEBRUARY 2017
Eurozone Economic Watch FEBRUARY 2017 EUROZONE WATCH FEBRUARY 2017 Eurozone: A slight upward revision to our GDP growth projections The recovery proceeded at a steady and solid pace in, resulting in an
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 informationEuro Rates Update. 26 January % 0.9% 0.8% 2.4% 0.7% 0.6% 2.2% 0.5% 0.4% 2.0% 0.3% 0.2% 1.8% 0.1% 0.0% 1.6% Jan-15 May-15 Aug-15 Nov-15 Feb-16
FI Strategy Nordea Research, January 1 US Treasury Yields Y Y 1Y 3Y.7 1... 1D -1.7 -. -. -. 1W.3.9 1. -1. German Benchmark Yields Y Y 1Y 3Y -. -.3. 1. 1D -. -.3-1.7-3. 1W -. -.7. -.1 German Curve Slopes
More informationResearch Euro area: debt crisis set to continue for years
Investment Research General Market Conditions 13 September 20 Research Euro area: debt crisis set to continue for years At the beginning of the year, we presented three debt crisis scenarios. In this document
More informationEuro-QE at the end of the road for now
Germany France Italy Agencies Spain Netherlands Belgium Austria Portugal Finland Ireland Slovakia Slovenia Lux Latvia Lithuania Malta 7.8 2.6 2.1 3.21 1.17 Trend Macrolytics, LLC Donald Luskin, Chief Investment
More informationAuction of DGB Opening auction of new 10Y DGB on Wednesday 25 January. Frederik Nordsborg. Maria Holm Rasmussen 20 January 2017
1 Auction of DGB 227 Opening auction of new 1Y DGB on Wednesday 2 January Frederik Nordsborg Maria Holm Rasmussen 2 January 217 DGB 227: Main arguments and pricing Pros (tight pricing) DKK callable covered
More information