The central bank that can’t shoot straight is an apt description for the ECB. Yes, the ECB’s easing appears to be massive at first sight (look! 1.1 trillion euros in QE this year!) But easing has only slowed, not stopped tightening of financial conditions, and money market conditions in particular. Over the past four weeks GC deferred overnight repos is up 5bps; ESTR is up 2bps; since early March Treasury bills maturing this summer up 9bps (DTC) to 33bps (BOT); the 10y real yield, defined as the 10y Bund yield minus the 10y inflation swap rate, is up by about 90bps; the euro nominal effective is up more than 2%; Stoxx50 is down more than a fifth; Itraxx Xover (synthetic junk bond spreads are up by more than 300bps; peripheral spreads up by 50-70bps in 10y sector… we can go on here ad nauseum.



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