HALISTER1: Case for ECB QE Extension Builds After German IP Data: Scotia

Case for ECB QE Extension Builds After German IP Data: Scotia

(Bloomberg) -- German industrial production and orders data this week add to the case for a downward revision in the ECB’s forecasts, likely triggering a decision tomorrow to prolong QE, ScotiaBank strategist Frederic Pretet writes in client note.
  • To extend the program by 6 months, the central bank could lift the issue limit on high-rated sovereigns and supranationals to 50% from 33%
  • Also anticipates a deposit-rate cut of 10bps, in line with Scotia’s expectations for a lower inflation profile in the bank’s forecasts
  • As this will mean the ECB buying more bunds, expects curve to flatten
  • NOTE: EGB curve bull-flattening shows investors positioning for more QE; analysts expect ECB any extension later in the year rather than tomorrow
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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2539Z GR (European Central Bank)

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Frederic Pretet (Bank of Nova Scotia/The)

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