• Which brings us to our favorite topic, the ECB. Reasonable people will agree that, more likely than not, the worst of the pandemic and the recession is probably behind us. The vaccines will arrive one day, GDP is bottoming out and so is inflation. Hence the ECB’s guidance that – more likely than not – no new stimulus is needed. In fact, the ECB’s preference is to buy less bonds under its pandemic QE program than advertised. Which is precisely what is happening. In the past four weeks total bond holdings increased by 71 billion euros. That is the lowest 4-week net purchase volume since August, when purchases tend to be dialed down because of the summer holidays. Now, we’re not saying that the ECB is quietly tapering QE. There’s quite a bit of volatility in weekly and monthly purchase volumes. Low volumes in one month isn’t a trend (yet). Still, the ECB cooling on QE makes last week’s deposit rate cut talk all the more perplexing.

For the full report, click here