Draghi signs off on a high note - ANZ

Make no doubt – the ECB delivered a bazooka yesterday and any thoughts of tapering have been crushed, and ANZ expects further EUR weakness, and continued portfolio outflow from Europe expects David Croy, Senior Rates Strategist at ANZ.

Key Quotes

“In terms of specifics, the ECB extended QE (by €540bn), allowed the purchase of bonds with a minimum one year maturity and the purchase of bonds with yields below the deposit rate (-40bps). While initial headlines focusing on the asset purchase program being reduced from €80bn to €60bn were viewed as hawkish (and saw EUR spike higher), taken in the context of the length of the program extension (an additional 9 months) it was quickly seen as a dovish policy action. Beyond this, the ECB is now able to purchase paper with yields below the deposit facility (-0.4%) causing a rally in front end yields; and the purchase program appears open ended, with the option to increase and/or extend as needed.”

“The ECB did not discuss tapering and Draghi noted that they wanted to signal to the market they would have a “sustained presence” in the bond market. So – that's it from Mario for 2016. He has ended the year on a high. The recovery is modest, but broad based and well under way. Headline inflation is picking up slowly and deflation has been averted. He's managed to engineer a very significant easing to support growth in what is going to be a year of political angst. Well, that’s the plan anyway!”