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How did ECB over-deliver on & why do banks trade so weak? (thread)
1- Rate cut 10bps (consensus)
2- 2 Tier remuneration system for reserves (details later. In Switzerland it's 20x min reserves but they can't replicate that in Europe without pushing up overnight rate too much)
1- Rate cut 10bps (consensus)
2- 2 Tier remuneration system for reserves (details later. In Switzerland it's 20x min reserves but they can't replicate that in Europe without pushing up overnight rate too much)
3- OPEN ENDED QE of EUR20bn as of Nov 1(smaller monthly amount but the open-endedness is a surprise esp given pushback from the hawks)
4- Better rates for TLTRO with sliding scale starting at refi rate and as low as deposit rate if banks lend. This is similar to UK FLS scheme
4- Better rates for TLTRO with sliding scale starting at refi rate and as low as deposit rate if banks lend. This is similar to UK FLS scheme
5- Guillaume Menuet from @citi on our show thinks this point is huge: Forward Guidance and adding the line on inflation convergence to 2% being reflected in UNDERLYING INFLATION DYNAMICS (this is code for core inflation)
They are doubling down on symmetry of infl target here
They are doubling down on symmetry of infl target here
Draghi confirms that this fwd guidance "links policy to more stringent conditions to inflation outlook"
Basically means rates are going to be on hold for a very very very long time.
Bund market has rallied (much flatter). That's a negative for banks DESPITE tiering
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Basically means rates are going to be on hold for a very very very long time.
Bund market has rallied (much flatter). That's a negative for banks DESPITE tiering
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