Thread by @RickRieder

All eyes will be on the @federalreserve and the @ecb policy meetings this week, particularly as the @EUCouncil meeting last week was directionally encouraging but lacking in #policy specificity.

Regarding the #Fed, we expect the Committee to reiterate its guidance that the target range for the federal funds rate will remain at zero until after #coronavirus-related disruptions to the #economy have healed.

Further, while the #FOMC will have to update its statement a good deal to better reflect the severity of the #economic contraction underway, it will also take the opportunity to describe the transition from emergency support of market functioning to a long-term #LSAP regime.

It’s our expectation that #Fed asset purchases will be scaled to effectively offset @USTreasury issuance, to maintain an accommodative term structure of #rates; critically the #FOMC will utilize language that maintains optionality of action, as they don’t want to box in policy.

And while the spotlight has often been on the #Fed of late, the #ECB policy response is also very meaningful, and we expect that central bank’s #PEPP program to be increased, but whether it takes place this week, or at the June meeting, is an open question.

Also, while #asset purchases have already been skewed toward Italy, we’ve nevertheless witnessed #BTP spreads widen considerably, so how much more will be needed to contain #sovereign spreads? We’ll be keeping a close eye on that issue this week.