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Joumanna Bercetche 🇱🇧

@CNBCJou

31 Dec 19

So here it is: my #Odeto2019 - Enjoy (it's long) !

'Twas the Night before Xmas
Stock markets at record highs
Tech sector breaking into new territory
Brushing off trade war & recession cries

But what a year 2019 was,
Let's rewind back to last December
The world was looking a little different
One last hike the Fed would rather not remember

Only took 7 months to reverse course
"A mid cycle adjustment" Powell mumbled
followed by two step September and October cuts
"Where did I find this guy" the President grumbled

Read 22 tweets

Joumanna Bercetche 🇱🇧

@CNBCJou

12 Sep 19

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)

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

@citi

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

Read 4 tweets

Joumanna Bercetche 🇱🇧

@CNBCJou

10 Sep 19

#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

@LHSummers

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

Joumanna Bercetche 🇱🇧

@CNBCJou

7 Aug 19

Eurozone Banks (thread): been covering earnings season again; a few takeaways:

Let’s start with positives:
1- Banks much better capitalized & have built up much bigger liquidity buffers in the last few yrs
2- There has been progress on cost cutting but..

Now for the negatives:

Negatives:
1- You can’t cut ad finitum without compromising on core businesses. Cost / Income ratios still too high namely because revenues aren’t growing enough/ at all in some cases
2- Low / negative interest rates eat away at margins (even if volumes go up)
3- Too.Many.Banks

More than 6000 banks operate in the EU ; some of which are implicitly grteed by state and are non-economic players eating into others’ margins. BUT
4- Cross Border mergers are extremely difficult to achieve in this regulatory environment & lack of progress on banking union

Read 5 tweets

Joumanna Bercetche 🇱🇧

@CNBCJou

23 Jul 19

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

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