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Wednesday, June 4

5th Jun - ECB Preview

June 5
Live: What Will the ECB Decision Mean for the Euro-Zone?WSJ
Join The Wall Street Journal’s Brian Blackstone and Nell Henderson along with WSJ contributor David Wessel in a live video Spreecast discussion about the ECB decision, what ECB President Mario Draghi says in his press conference, how markets reacted and what it all means for the euro-zone economy.

FX Update: All the fallout from all ECB scenariosTradingFloor

How will bond markets react to today's pivotal ECB meeting?TradingFloor

Negative ECB Deposit Rate: But What Next?naked capitalism

ECB Decision DayMarc to Market

ECB Decision-Day Guide (In 5 Simple Questions)ZH

The ECB is about to introduce negative rates. Can it save the euro?WaPo

Negative ECB deposit rate: But what next?Bruegel

The big day arrivesMacro Man

Q&A: The ECB’s crucial voteFT

The ECB Will Need More Than Negative Rates To Get Lending GoingWSJ

June 4
The ECB Will Likely Act, But Is Still Falling ShortPIIE
The increasingly dovish rhetoric from ECB officials has already been priced in by financial markets. This means that the markets would react negatively to a failure to act, and that it will be harder for Frankfurt to surprise investors. A package of smaller actions is thus likely.

ECB preview: Rate cuts... and then someTradingFloor
The ECB Governing Council is expected not only to cut the three key policy rates at the June meeting but also to add some measure of credit easing, possibly a vLTRO.

ECB Watch: Mario's moody mixtape of monetary policyTradingFloor
On the eve of the ECB's latest policy-setting jamboree, the market's eagerness to discover the true meaning of "whatever it takes" is palpable. But the blindingly obvious (and painful) fact is that QE is a gargantuan waste of money.

The Market Says the ECB Will Act. What to Expect NextWSJ

What Exactly is in the ECB’s Toolkit?WSJ

The ECB’s Negative Deposit Rate – The Short AnswerWSJ

Easier monetary policy should be no worry to GermanyBruegel

The ECB can and should make the ABS market happenFT

Great Graphic: Borrowing Rates in EuropeMarc to Market
The rate that banks charge small and medium businesses in Spain, Italy, France and Germany.  Italian and Spanish rates fell, though are still well above French and German rates.

Inflating Deflation: Confusing Symptoms with the IllnessMarc to Market

ECB preview: Rate cuts... and then someTradingFloor

ECB Watch: Mario's moody mixtape of monetary policyTradingFloor

Weakening the Euro, Easier Said Than Done WSJ

Lithuania and the ECB’s governing councilFT
If Lithuania’s accession goes ahead, from January, only the members of the executive board, which include ECB president Mario Draghi, will still be able to vote at each meeting. Under the new system, the number of voters will be capped at 21, meaning there will be four central bank governors at each meeting who do not vote.

Weekly Focus: ECB has the potential to surpriseDanske Bank

June 3
Draghi Is "Desperate To Avoid A Japan-Style Lost Decade"ZH
SocGen on ECB.

Europe needs a 'Big Bazooka', but the ECB is preparing a peashooterThe Telegraph
Europe’s high command has convinced itself the worst is over, and with a little fine tuning by the ECB, decent growth will return

Markets now expect shock and awe from the ECBSober Look
Unless we see "shock and awe" from the central bank, global markets will be quite disappointed.

Napoleon’s Yields No Comfort to Draghi Fighting DeflationBB
Europe’s lowest government bond yields since the Napoleonic Wars are signaling investors want more action from Mario Draghi.

There’s a Risk the ECB Will Just Push Deflation ElsewhereWSJ
It’ll be a relief if the ECB manages to get the euro-zone economy going again, but not if that growth comes at the cost of slowdowns and deflation elsewhere.

June 2
ECB preview: Even a package deal not enough to sustain a bond rallyNordea
There can be little doubt the ECB will provide a whole package of easing measures in its meeting on Thursday, including rate cuts, liquidity measures and a conditional LTRO. Even a whole package of measures is unlikely to be enough to sustain a core bond rally, and longer yields are set to see a rebound higher, while the curve will steepe

Whatever ECB Does, It Won't Deliver Significant Impulse To Real EconomyZH

An enticing Very Long Term Refinancing Operation from the ECBMoney Matters

Targeting your LTROFT
Nomura and JP Morgan on different types of LTRO that the ECB could offer.

Draghi Primes ECB as Inflation Scarcity Alarms OfficialsBB

June 1
The case for a better functioning securitisation market in the European UnionECB
Joint paper by ECB & BoE.

Waiting for the ECBBNP Paribas

FI & FX Strategy - Scandies through the lens of ECB actionNordea
In our view, the risk that ECB will disappoint markets in a meaningful way is limited and when a central bank is increasing the amount of stimulus it’s indeed difficult to end up with the conclusion that it will lead to negative market effects. However, things like negative deposit rates and QE is uncharted action in its nature and can nevertheless trigger flows and chain reactions in asset space that may not be ideal – particularly in the light of the past years one-sided action in risky assets and fixed income spread-over, and given the abnormally high directionality these different assets have exhibited…

May 30
Mr. Draghi–Your Public AwaitsWSJ
According to a client survey carried out by foreign-exchange analysts at Nomura this week, 95% expect a cut to the refinancing rate—currently at a record low of 0.25%–while 90% think the ECB will press ahead with a negative deposit rate. More than half are expecting some form of liquidity injection, although just 10% anticipate a QE announcement next week. In short, hopes are running high.

ECB signals fire up Eastern European bond rallyFT

ECB and BoE plan to revive EU securitization, boost investmentReuters
The ECB and the BoE set out proposals on Friday to resurrect the European Union's market for asset-backed securities and help the flow of credit to smaller businesses. -

ECB ready to act to avoid risks from low inflation: Constancio - Reuters
ECB vice president Vitor Constancio said on Friday the ECB was not complacent about the risks from a protracted period of low inflation and would act if necessary.

ECB's Visco warns on inflation drop, euro strengthReuters
Excessively low inflation in the euro zone should be dealt with as firmly as high inflation, ECB Governing Council member Ignazio Visco said on Friday, adding that a strong euro had helped push inflation too low.

May 28
ECB research #5: The end of ECB’s easing cycle?Danske Bank
In our main scenario the ECB takes a significant easing step and surprises markets at the meeting in
June. This could very well be the end of the easing cycle as it should lead to higher growth and put upward pressure on inflation. It will take some time before the impact of the easing is seen and inflation should stay around the current level until Q4 and only drift slowly upward afterwards. In light of this the discussion about further easing can continue for some time.

ECB’s three-pronged strategy: a trident or triage?TradingFloor
The consensus overwhelmingly expects the European Central Bank to introduce drastic monetary easing on June 6. This requires a mix of policy tools, as single isolated measures would not work. Getting the mix right and satisfying expectations could prove difficult.

European Bonds Front Running ECB Setup for DisappointmentEconmatters

The ECB Eyes Danish NegativityWSJ

ECB Framework: BEEEPMarc to Market
Next week's ECB meeting could very well prove to be among the most important events of the year.  It has taken ECB President Draghi's leadership and increased risk of lowflation if not deflation to forge an apparent consensus at the central bank that more action is needed.

May 27
Implications of negative rates - the Danish experiencesDanske Bank

Draghi spells it outThe Economist

Euriborderline insane?Macro Man

Complete the sentence: Mario Draghi is...? Saxo TV
ECB obsessed with the EUR strength, missing everything else.

ECB Conference Brings Policy Clues and Inflation Target DebateWSJ

At ECB Conference, Krugman Attacks Inflation TargetWSJ
The case that 2% turns out to be too low a target is quite compelling, Krugman said.

Krugman gives Draghi some advice FT
It only took a few hours for Mario Draghi to join the list of names at Sintra saying no to Prof Krugman’s calls for a higher inflation target.

Can Mr. Draghi Actually Do Anything About Inflation?WSJ

Draghi and the case for securitization FT
Draghi’s Asset-Backed Drive Rouses Academic SkepticsBB

May 26
Draghi Convenes Mountain Retreat as ECB Contemplates New HorizonBB

Draghi: Monetary policy in a prolonged period of low inflationECB

Draghi’s Drive for Asset-Backed Action Rouses Academic SkepticsBB

ECB research No. 3: Expectations of easing but ECB will surprise the marketsDanske Bank

May 23
ECB's inflation projection, exchange rate and global food pricesDanske Bank
We think it is almost certain that the ECB will lower its inflation projection for 2014 and we also expect a slightly lower forecast for 2015, but in our view the ECB will keep its 2016 forecast unchanged at an already low rate of 1.5%

Risk of disappointment from the ECB in June remains highSober Look

A negative ECB deposit rate: “What difference would it make?”Reuters

May 20
ECB's Mersch says chances for June action grown substantiallyReuters
There were increasing signs on Monday that the European Central Bank will add more stimulus to the euro zone economy at its June policy meeting as inflation remains stuck at very low levels.

Where could ECB interest rates go?Money Matters

Combatting the Crunch: ECB Plans Negative Rate on Bank DepositsSpiegel
When it meets on June 6, SPIEGEL has learned, the European Central Bank may implement a negative interest rate for financial institutions seeking to park their money at the Frankfurt powerhouse. The move is aimed at spurring loans.

May 19
Former ECB Official Sees Few Obstacles To QEWSJ

Euro area deflation monitorDanske Bank

Blogs review: Benign and malign deflationBruegel
As Europe experiences disinflation and worries about deflation risks, a number of policymakers have advanced the idea that deflation is not necessarily a bad thing. Deflation, it is sometimes argued, increases the purchasing power of those with fixed incomes. Deflation is also good when associated with positive supply shocks as several historical episodes suggest.

May 18
Charting Europe’s JapanificationFT
Credit Suisse: The lessons from Japan suggest that policy action in coming months may be critical for a recovery in inflation.

Secular Stagnation in the Euro AreaKrugman / NYT
Europe is extremely likely to have a significantly lower natural real rate of interest heading forward than it had in the past. This in turn suggests that it’s a really really bad idea to let inflation drift down, whether or not it turns into outright deflation.

Does the Euro Zone Need Deflation?WSJ
Ultimately, euro-zone governments are likely to backslide on their treaty obligations if, as seems likely, the ECB fails to trigger significant growth. In which case, they’ll be glad if deflation allows them to sell vast quantities of debt.

DBW: ECB negative deposit rate editionFT
The most discernible impact of a negative deposit rate in the broader financial markets may well be an intensification in the hunt for yield.

The ECB should do
As banks repay their loans from the Long-Term Refinancing Operation, the ECB’s balance sheet is shrinking. This column argues that, given the slow recovery and sustained low inflation, the ECB should replace its bank lending programme with quantitative easing. Buying short-term government debt would be consistent with the ECB’s inflation target, would keep the ECB’s monetary policy separate from its role in bank supervision, and would create a built-in exit strategy from unconventional policy.

Japan Privately Questioning ECB’s Currency RhetoricWSJ
Japanese officials are privately voicing their frustration at Europe’s attempts to talk the euro down against other currencies, a move some of them see as hypocritical.