From Europe, with love:
ECB's 1-year money: The highlight was of course the huge 1-year provision of money at 1% by the ECB, which has set in motion a decline in money market rates that I suspect will broadly equate what would have happened if they had cut their policy rate to 0.5%. Bending to the evidence that the ECB prefers to provide the last bit of monetary easing via liquidity provisions rather than rate cuts, Goldman changed their forecast for policy rates to “unchanged” at 1% for the next 12 months.
ECB's 1-year money: The highlight was of course the huge 1-year provision of money at 1% by the ECB, which has set in motion a decline in money market rates that I suspect will broadly equate what would have happened if they had cut their policy rate to 0.5%. Bending to the evidence that the ECB prefers to provide the last bit of monetary easing via liquidity provisions rather than rate cuts, Goldman changed their forecast for policy rates to “unchanged” at 1% for the next 12 months.
On the policy side: The Spanish government approved a EUR 9bn fund to bail out needy banks, while the Germans are focusing on their fiscal exit strategy via a rule-bound fiscal consolidation that’ll limit the cyclically adjusted deficit to 0.35% from 2016.
Latvia help: In a stunning move, the European Commission announced last Friday that it'll disburse a EUR1.2bn loan tranche to Latvia in the next few weeks as the revised memorandum of understanding between the EC and Latvian government is finalised. This should be positive for CDS spreads for the Baltic states and Sweden, and also (at least temporarily) dampen a potential source of volatility in the CEE region.
Thanks Goldman….
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Latvia help: In a stunning move, the European Commission announced last Friday that it'll disburse a EUR1.2bn loan tranche to Latvia in the next few weeks as the revised memorandum of understanding between the EC and Latvian government is finalised. This should be positive for CDS spreads for the Baltic states and Sweden, and also (at least temporarily) dampen a potential source of volatility in the CEE region.
Thanks Goldman….
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