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9 Jan 2015
ECB’s QE might lead Bunds downwards – KBC
FXStreet (Barcelona) - According to the KBC Team, Monday’s price auction suggests the bund market might be preparing for a probable QE announcement by the ECB, further expecting bunds to move to the downside if ECB delivers on QE.
Key Quotes
“We hold our view that at least until the day that the ECB effectively walks the QE talk, there is very little upward potential in German yields.”
“Given Draghi’s stark warning in Handelsblatt last week (“Deflation risk cannot be ruled out completely …but we need to tackle that risk”) such action is highly likely at the Jan 22 meeting. At previous QE-programmes by BoJ, BoE & Fed, a significant buy-the-rumour, sell-the-fact occurred after the effective announcement.”
“Technically, Monday’s price auction had something of an exhaustion move and the Bund market might be gradually preparing for the ECB. If the ECB delivers at the Jan 22 meeting, we think there is downside in the Bund.”
Key Quotes
“We hold our view that at least until the day that the ECB effectively walks the QE talk, there is very little upward potential in German yields.”
“Given Draghi’s stark warning in Handelsblatt last week (“Deflation risk cannot be ruled out completely …but we need to tackle that risk”) such action is highly likely at the Jan 22 meeting. At previous QE-programmes by BoJ, BoE & Fed, a significant buy-the-rumour, sell-the-fact occurred after the effective announcement.”
“Technically, Monday’s price auction had something of an exhaustion move and the Bund market might be gradually preparing for the ECB. If the ECB delivers at the Jan 22 meeting, we think there is downside in the Bund.”