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#ECB thread

Here's what analysts are expecting:
1) Majority expect 10bps rate cut to -50bps (minority 20bps cut)
2) Tiering
3) Restart of Asset Purchases : sov +corp bonds of EUR 30bn x 12 months (risk of LESS given recent hawkish commentary)
4) Enhanced Fwd Guidance
1) rate cuts

The interest rate mkt is expecting 50% probability of a 20bp cut (or 15bps priced in for Sep) and another ~10bps in December, troughs at 34bps cuts next summer

Rate cut to 1/ target EUR & 2/ extra kicker for TLRO3 which starts in Sep 3/ stimulate credit demand
But whether stimulating credit demand leads to pick up in nominal growth is questionable-chart from Citi below

@LHSummers recently called negative interest rate policy 'black hole economics' because marginal positive is offset by counterproductive side effects incl misallocation
Read 12 tweets
I've been very outspoken about #Brexit, which has raised some questions of why. Here, my five cents.

First, I am a big believer of democratic decision making. The straighter the better.

In my opinion, Brexit ref was a pinnacle in the long history of democracy in Britain. 1/
Second, the EU has continuously grown less democratic (despite of the claims to the contrary).

While first refs on EU were conducted in good practice, problems started when referendums turned against further integration. These include the double-refs in Denmark and Ireland. 2/
But, it got worse.

When European debt crisis, which actually was a (masked) banking crisis of Germany and France, threatened to break the euro, the response of European leaders was to bypass European laws.

Most notably, bailouts breached Articles 125, banning mutual... 3/
Read 9 tweets
Tomorrow the European Parliament will host a hearing with Christine @Lagarde, in order to confirm her appointment as #ECB president. Ahead of the session, Lagarde answered 70 questions from MEPs - we read them all so you don't have to. THREAD👇europarl.europa.eu/meetdocs/2014_…
1/ On the positives: Lagarde wants the #ECB to make climate change a priority. She committed to ensure the ECB plays an active role in the @NGFS_ and, "as soon as such a taxonomy is agreed, the ECB will need to assess whether and how it can apply it to QE."
2/ However @Lagarde is obstinate to follow the business as usual "market neutrality" approach of the #ECB in Corporate QE. We're still wondering how mirroring markets in portfolios is consistent with the need to cope with market failures and create new investment incentives. 🤔
Read 8 tweets
#ECB is likely to crash EUR in attempt to stimulate EU-economy🤦‍♂️(incompetence in ECB is staggering!). Wait for waterfall moment in #EURUSD. Currently flirting with LT-trendline. Target 0.85-0.91 #HZupdates
Major drop in #EURUSD will send #USD #DXY soaring (following pot. ST weakness). LT-target for DXY is >111. This is likely to be the trigger for REAL Fed intervention, which will push economy out of Deflation #HZupdates
Rally in #USD will push #Gold (#XAUUSD) into major decline in final wave C, which will take yellow pet rock below 1000 USD. Imo no way that structure of rally since 2015 is new Bull market. It is ZigZag-correction topping ~1480 (here!) or ~1590 (-1600). Major Bull trap #HZupdates
Read 8 tweets
Germany, yesterday, issued a 30-year bond that offers negative yield (average yield of -0.11%).

This typically means that investors are paying German government to hold their debt. Why would investors invest in such a bond? Thread 1/8
The coupon set on these bonds (or Bunds, as they are called in Germany) is 0% i.e. the government will not pay any interest at all on these bonds.

In comparison, if GoI issues a 30 year bond today, the interest rate offered would be ~7%. 2/8
A negative yield of -0.11% means that an investor in this bond will pay 11 basis points per year to German Govt to borrow the sum i.e. an investment of Rs. 100 in these bonds would yield ~Rs. 97 in 30 years, a loss of ~Rs. 3. 3/8
Read 13 tweets
Good morning! 😁Deflationary phase is developing in economy. Stay tuned for my perspectives on coming developments in markets based on charts - technical and fundamental analysis #HZupdates thread coming up!
SP500 recovered some of the loses from early trading this week. Still, I think we have seen the top of the Expanding Diagonal, and we are currently in the Deflationary part of the crisis, where growth in economy is rolling over. Target ~2050 by Q1/Q2 2020 #HZupdates
#SP500 - will we see rally to 2950 for pot. top of wave 2 (black) before reversal and strong decline? That would close the gap in market from early Aug. #HZupdates
Read 16 tweets
Oggi #14agosto 2019 è passato un anno dalla tragedia del crollo del viadotto sul Polcevera (#PonteMorandi). A #Genova la commemorazione delle vittime affidata all'omelia di S.E. Card. Angelo Bagnasco. [DIRETTA VIDEO]

video.lastampa.it/cronaca/ponte-…
#14agosto 2019, S. Messa di commemorazione delle vittime di #PonteMorandi affidata a S.E. Card. Bagnasco a un anno esatto dall'immane tragedia del crollo del ponte. Cerimonia molto toccante. La rappresentante del comitato familiari delle vittime ci ha commosso con le sue parole.
Ore 11:36 del #14agosto 2019, S. Messa di commemorazione delle vittime di #PonteMorandi affidata a S.E. Card. Bagnasco a un anno esatto dall'immane tragedia. Cerimonia molto toccante. Il pianto dei parenti delle vittime e lo scandire dei 43 rintocchi delle campane di #Genova.😭🙏
Read 9 tweets
🇩🇪 It confirms that German GDP likely ⬇ in 2Q while proxies pointed to the risk of another ⬇ in 3Q (technical recession).

This scenario would add pressure on #Germany to launch a stimulus package to support growth at both the national and 🇪🇺 level.

🇪🇺 Trichet Sees Next Crisis if #ECB doesn’t get Help - Handelsblatt
handelsblatt.com/finanzen/geldp…
🇩🇪 #Germany’s economy needs a fiscal boost - FT
ft.com/content/5ea7db…
Read 42 tweets
Mega #ECB thread- bear w me:)

Thursday’s mtg is shaping up to be an extremely important one

Most analysts expect #Draghi to tilt further dovish & indicate a “package of measures” for Sep but not act YET
Why wait? 1/ Fed first 2/ New projections in Sep 3/ Hv to agree on package
Reminder: what are ECB’s tools? ⚒:
- forward guidance (currently calendar based)
- rate cuts
- QE (sovereign, agencies, corporates)* I’ll come back to this point
- bond re-investments (ppl often forget this one)
So... What’s priced?
- Market is pricing in 3bps cuts July, 13bps in Sep

What about QE? *tougher to estimate
- Barclays compare mkt reaction post Whatever It Takes to post-Sintra (not really 🍎 to 🍏 but ok) : strong rally already in periphs ; look at BTPs & 5y5y infl 👀
Read 9 tweets
++++Cosa sa la #Bce che noi non sappiamo? Nulla di buono. @ollirehn a @boersenzeitung : 'C'è bisogno di lanciare nuovi stimoli monetari, Bce si prepari al peggio'. E tassi Bund 10 anni scendono sotto tasso depositi Bce -0,40% +++++ bit.ly/2Javxgs #trading
@ollirehn @boersenzeitung @finanza_com @finanza_online @Borseit @pelias01 @AlienoGentile @carloalberto @ricpuglisi @albertobisin @monacelt @ollirehn : "Low inflation expectations are a 'great concern'; market based expectations are 'far too low'
Eurozone experiencing a longer phase of weaker growth, slowdown no longer temporary" VIA a @boersenzeitung In bocca al lupo #Lagarde
@ollirehn @boersenzeitung @finanza_com @finanza_online @Borseit @pelias01 @AlienoGentile @carloalberto @ricpuglisi @albertobisin @monacelt @ollirehn : "#ECB should prepare for stronger and prolonged slowdown, says better to prepare for the worst. ECB can change forward guidance, cut rates or resume #QE if needed VIA @boersenzeitung
Read 12 tweets
[THREAD]🌏Find out our global outlook & central scenario for H2-19-2020: uncertainties surrounding global economic dynamics will weigh on overall growth #Outlook #tradewar #Brexit
🔎Our scenario is based on the strong assumption of a UK exit from the EU without a withdrawal agreement #Brexit #HardBrexit🇬🇧🇪🇺
Mainly, expectations are:
🔻a recession in the #UK and a slowdown of #growth in the euro zone
🔻3 #Fed rate cuts of 25 bps in July, September & December 2019
🔻a cut in the deposit rate by the #ECB by 10bps in September 2019
Read 4 tweets
Hearing many exaggerations these days. So, here an attempt to put things into perspective: (1) yes, (s)election of new #EU leadership involves power politics in #EP & #EUCO & between them, but that's how politics & democracy function – at all levels incl. #EU – get used to it;
(2) yes, #Spitzenkandidaten process not perfect, but it is here to stay although it needs to be reformed before 2024 #EP elections (incl. introduction of #TransnationalList) – 2019 experience should provide lessons to everyone (including European & national political parties);
(3) yes, #EP increasingly runs risk of being sidelined in leadership (s)election process, but majority in Parliament can still agree on common candidate for COM-P, who has a chance to be nominated by #EUCO;
Read 8 tweets
By the end of 2019, the #Eurozone Benchmark interest rates, i.e. the overnight #EONIA rate and the #EURIBOR family (with maturities from 1 week up to 12 months), will either be replaced or their calculation methodology will be radically reformed.
The benchmark rates calculation methodology is not compliant with the #EU Benchmarks Regulation (BMR), applied from Jan. 1st, 2018, which emerged in the aftermath of the #LIBOR & #EURIBOR market manipulation scandals & the #2008_financial_crisis. bis.org/publ/qtrpdf/r_… @BIS_org
On September 14th, 2018, the working group on euro risk-free rates (#WG_EuroRFR), set up by the @ECB, the @FSMA_info , @ESMAComms & the @EU_Commission, proposed the ECB’s #€STR as the replacement of #EONIA
bit.ly/2UDzu4L
bit.ly/2OjrSNo
bit.ly/2YNPxeB
Read 12 tweets
domani i nostri questuanti vanno a chiedere l'elemosina a bruxelles
in genere bruxelles è prodiga di brioches fresche, ma sono rimaste quelle secche e scadute
e non è detto che siano commestibili così oltre scadenza
Read 346 tweets
DELAYED RECAP monthly MT GLOBAL M.PMI surveys Apr2019 thread 1/n (probably 30) (as of May2nd)

• Global Biz confidence remained at 2.5Y lows
• DM notch higher
• EM barely > 50
• F5 6M low

= global slowdown continues
= global centralbanks dovish
= disinflationary
2/n Global M.PMI heatmap

• Canada joined <50 club, 38M low
• Germany still 44+
• Austria joined <50 club, 4Y low
• Switzerland joined <50 club, 4Y low
• Czech 76M low
• Sweden 32M low
• Singapore 29M low
• China hovers at 50

...
3/n Global M.PMI in relevance to GDP distribution

• I'd be more stock bullish if those "bubbles" shift to the right quads
• turning into left quads is actually bond bullish
Read 22 tweets
For almost two years now, I've been randomly but constantly been drawn into discussions about the benefits of the euro.

The simple fact is that at the macro level, there are basically none. In the firm-level, especially in the SME -level, there are few. But, 1/
The question is, which should weigh more? The larger single-currency financial markets or a floating exchange rate that corresponds to the macroeconomic and political conditions of each country.

I think that answer, undeniably, is that the latter is more important. 2/
This is because global financial markets are very open and developed nowadays. Funding and hedging is widely available.

However, cutting wages and prices in a #recession has proven very difficult as it has been since the end of the 'liberal era' in early 1900's. 3/
Read 6 tweets
1. Politicians are lying to you: For almost 10 years we had near zero percent #interest, #ECB & #FED printed billions of $ & € creating huge asset #bubbles in #stocks & #properties. On top thousands of foreigners bought "cheap" properties in GER.

#Habeck #Enteignungen
2. On top many cities, especially #Munich, allowed only few new properties to be build - For 3 new families that reached Munich only 1 new home was build!
This scarcity is by design, since it inflates the value of existing #properties, enriching the "haves".
#Habeck #Enteignungen
3. The next money printing scam are all the regulations that hit home-builders in the last plus 10 years: "Dämmung","energetische Sanierung" (to prevent loss of heat/energy) and more is expensive & thus reduces the numbers that can afford a home & increases #rents.
#Enteignungen
Read 11 tweets
the @Europarl_EN is about to pass a new macro-finance initiative that threatens fiscal policy space for Euro Member States - 'far from being a stabilizing mechanism for the euro, SBBS would become yet another instrument of fiscal discipline'.
SBBSies wont do much good when a euro country comes under pressure in sovereign bond markets, but it can do significant damage #safeasset
no matter how many speeches and op-eds we get from European leaders calling for a Europe that can oppose US and China, we wont get one unless we can create a single safe asset. If only the new #ECB governor would fight for this #Benoit2019
Read 3 tweets
..poi un giorno ci farete sapere quanto avete alzato shortando italia quando eravate sovranisti (hawkish) e poi rigirandovi una volta tornati euristi (dovish)
Il "flip-flop" di questo governo oltre ad essere un bail-out mascherato per banche IT via BTP, è "gain" per establishment
Establishment IT alla "canna del gas"..."o XI...o MORTE"...
Read 1014 tweets
ok a serious one on the #ECB decisions today 3d

1) TLTRO is a yawner. TLTRO is secured funding, so I never thought that not doing TLTRO would be an issue as banks reposess collateral and can eventually refinance it elsewhere.
1cont) On the pricing mechanism of TLTRO III the “incentives” are not yet out so I cant judge if it will be lower or higher than -0.4%

2) Forward guidance and rates: here is the main message. Ecb has lowered 2021 Cpi to 1.6% far from the “2% or slightly below 2%” target
2cont) BUT has moved the first rate rise timing only by one quarter to Dec ’19 for Sept ’19.

3) MY TAKE IS THAT THE ECB HAS GIVEN UP ON INFLATION TARGET. FROM WHATEVER IT TAKES TO WHATEVER.

4) that explains the bond rally and equity giving up

Regards
Read 6 tweets
MT GLOBAL M.PMI monthly recap Feb2019 surveys thread 1/n

• MT Global M PMI 51.3 29M L
• JPM Global M PMI 50.6 32M L
• Breadth chart
2/n Global M PMI world view

• Global 51.3 29M L
• DM 51.7 30M L
• EM 50.5 3M H
• F5 52.0 12M H
3/n Global M PMI "big 4"

• US 53.0 18M L
• EA 49.3 ! 68M L
• CHINA 49.9 3M H
• JAPAN 48.9 32M L

#GlobalSlowDown
#GlobalDovishCBs
Read 20 tweets
🇺🇸 #SPX (1) | Equities ⬆ significantly since Dec. lows with participants not taking into account:
1/ the global synchronised slowdown that should be associated with a global trade contraction (YoY) soon
2/ the likely earnings recession in U.S. (and 🇪🇺)
🇺🇸 #SPX (2) | The move can be partly explained by the dovish switch in CBs:
1/ #Fed makes a pause in ⬆ rates and should should stop ⬇ its BS by year-end
2/ #ECB is likely to delay its 1st rate ⬆ and will launch new TLTROs
3/ #BOJ is considering 4 options for extra easing
🇺🇸 #SPX (3) | This easing charge has significant repercussions on asset prices leading to a sharp ⬆ of bonds trading with negative yields (up 60% since Oct. according to a Bloomberg/Barclays index)

#TINA can also explain why investors have rushed into other risky assets
Read 10 tweets
This is a great, thought-provoking speech by #Draghi, on European sovereignty. Though I disagree with some parts, the final part on “rules vs. institutions” is excellent. A thread. ecb.europa.eu/press/key/date…
Draghi starts out with the alleged conflict between EU membership and #sovereignty, which is crucial to understand the populism of #Brexit, Le Pen et al. He says: no conflict at all, to the contrary.
“True #sovereignty is reflected not in the power of making laws – as a legal definition would have it – but in the ability to control #outcomes … The ability to make independent decisions does not guarantee countries such control,” says Draghi.
Read 17 tweets
...provano a mostrare che questo sia un "mondo" meraviglioso quanto più possono...Eurodollar timidamente si porta a sostegno di #ES_F ma #FED Fund Futures segnalano ancora ZERO chance di un rate hike e sono ancora in negativo per il 2019!!!
...occhio qui ...liquidità dal Tesoro US...si partiva da 403, siamo 363...arrivo a 320 a marzo e 300 a giugno...è tutta liquidità che arriva al sistema, alla fine sulle riserve delle banche commerciali e che sostiene gli asset finanziari...#ES_F
...aggiornamento sulla liquidità globale,come detto il miglior indicatore di volatilità=liquidità lo avete dalla differenza tra max e min sul ticks Index US,serve uno "spread" >2.500 stabile altrimenti "no party"
CBs e Trump Boys sono in controllo totale, establishment brinda...
Read 594 tweets

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