• Today’s ECB-only Comment is divided in two parts. A one-pager previewing today’s meeting (first part). And an in-depth analysis on the effect of bond buying and TLTROs on liquidity conditions in the next twelve months (second part). That analysis will show that the recent bond market sell-off has resulted in mispricing of Euribor futures (again) and even ESTR OIS, albeit marginally so in case of the latter.
  • Starting with the short preview, expect an ECB that remains upbeat on the economy as the Eurozone is still enjoying the vaccination/herd immunity dividend, which allowed the region to ride the global economic rebound. Lagarde & Co saw the risks to the economy as balanced last time. The usual suspects still apply: the recovery could be faster still on dissaving or strong(er) global growth, while a resurgent virus and supply chain disruptions would weigh down on growth. Having said that, the Eurozone probably saw peak growth rates this summer. Quarterly GDP growth rates will inevitably fall from here.

 

For the full report, click here