Halister News

(Bloomberg) -- Six people arrested after police raid on ICBC branch in Madrid were called before a judge on Friday, a court official said by phone.

• For link to related story on Spanish police making arrests in ICBC money-laundering probe: Link

(Bloomberg) -- German bund curve should continue to flatten as extension of ECB QE would reinforce concerns about ‘scarcity’ of bunds if the technical parameters of the program are left unchanged, Goldman Sachs strategists Silvia Ardagna and Rohan Khanna write in client note.

• Goldman economists’ base case is for a 10bp cut in the deposit rate to -40bp and an extension of the current QE from March to Sept. 2017 at the current pace
  • If the ECB eases in line with this, expect the policy change would fail to convince markets that the fight against persistently below-target inflation has been effectively stepped up
  • Core and peripheral EMU spreads should remain around current levels as investors are unlikely to be positively surprised by an ECB announcement that’s in line with Goldman’s base case
• If the Governing Council were to decide to supplement the depo cut and the extension of QE with changes to the technical parameters that would allow national central banks to buy govt securities at any maturity and/or with any yield, then concerns about a ‘scarcity’ of bunds would be alleviated and the curve would steepen
  • An expansion of the monthly pace of bond purchases (accompanied by changes to the QE technical parameters) would further accelerate the steepening of the bund curve and intra-EMU spread compression
• Purchases of govt securities skewed more toward sovereigns with the largest debt-market capitalization, purchases of financial institutions’ assets and some form of ‘helicopter money’ are measures that would be politically very challenging to implement but that are technically and economically feasible
  • If any of these options were adopted, markets would likely react positively, the EUR curve would steepen, inflation breakevens would increase and peripheral spreads would tighten significantly
• NOTE: Bund Flattening Defying Textbook Highlights ECB Angst; see Feb. 17 analysis here