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22 Jan 2015
EUR will not fall in a straight line - SG
FXStreet (Barcelona) - Kit Juckes, European Head of Societe Generale, explained that the ECB has announced sovereign QE starting in March.
Key Quotes:
"Total asset purchases at a pace of €60bn/month will start in March 2015 and operate through September 2016, though they could be extended if necessary. The amount has neatly exceeded the total floating round the market yesterday evening."
"The rates on LTRO were changed/lowered, which adds to the easing, and other details include the fact that they are buying bonds of governments and agencies, based on shares of ECB capital. The bulk of the purchases will NOT be subject to risk-sharing in the event of losses, which is no longer a surprise. The risks of agency bonds will be shared. They are buying 2-30yr paper, including Linkers. I wouldn't be surprised if they buy the occasional kitchen sink to, for throwing."
"The market reaction: pretty much unalloyed joy. Almost everything rallied. Equities are up, peripheral yields/spreads are down, short-dated swap rates are lower, credit spreads tighter. Bund yields fell and even 10yr Treasuries did (though not gilts, yah boo)."
"About the only thing which didn't rally was the Euro. If fell, sharply. Surely it can't keep falling without correction while the risk markets rally, but we're no wiser on the need for correction in EUR/USD."
"The size of the package means the biggest winners are high-beta currencies. My recommendation this morning was to sell EUR/PLN. That isn't the best-performing trade so far but short euro versus 'currencies with a bit more yield' will be today's catch-all. EUR/USD will be a good bit lower in 1, 3 and 6 months, but won't fall in a straight line."
Key Quotes:
"Total asset purchases at a pace of €60bn/month will start in March 2015 and operate through September 2016, though they could be extended if necessary. The amount has neatly exceeded the total floating round the market yesterday evening."
"The rates on LTRO were changed/lowered, which adds to the easing, and other details include the fact that they are buying bonds of governments and agencies, based on shares of ECB capital. The bulk of the purchases will NOT be subject to risk-sharing in the event of losses, which is no longer a surprise. The risks of agency bonds will be shared. They are buying 2-30yr paper, including Linkers. I wouldn't be surprised if they buy the occasional kitchen sink to, for throwing."
"The market reaction: pretty much unalloyed joy. Almost everything rallied. Equities are up, peripheral yields/spreads are down, short-dated swap rates are lower, credit spreads tighter. Bund yields fell and even 10yr Treasuries did (though not gilts, yah boo)."
"About the only thing which didn't rally was the Euro. If fell, sharply. Surely it can't keep falling without correction while the risk markets rally, but we're no wiser on the need for correction in EUR/USD."
"The size of the package means the biggest winners are high-beta currencies. My recommendation this morning was to sell EUR/PLN. That isn't the best-performing trade so far but short euro versus 'currencies with a bit more yield' will be today's catch-all. EUR/USD will be a good bit lower in 1, 3 and 6 months, but won't fall in a straight line."