ECB wasted an opportunity to prepare the market for the inevitable - Commerzbank

In view of the Christoph Rieger, Head of Rates & Credit Research at Commerzbank, the ECB wasted an opportunity in its latest meet to prepare the market for the inevitable.

Key Quotes

“As the market ought to realise that important legal constraints were indeed strengthened and look set to bite in early 2018, peripherals are exposed with Portugal first in line. Moreover, we argue that the package is a curve steepener and swap spread widener with the Greek ESM deal having potential to add to the ultra-long steepening.”

“Draghi has bought time with his latest set of measures, but the new technical €QE framework cannot hide the fact that smooth implementation will remain a key issue. Steady aggregate QE volumes mask the major shifts and already rising tensions beneath the surface as shortfalls in smaller countries including Portugal continue to deepen. Although the seasonal slow-down into year-end will provide relief, these frictions will extend with latest technical adjustments leaving the underlying drivers untouched.”