HALISTER1: ECB Policy Easing Has Peaked, Last Important Technical Tweak: DB

ECB Policy Easing Has Peaked, Last Important Technical Tweak: DB

(Bloomberg) -- Unless there is a significant political event, ECB’s “soft taper” puts conditions in place toward end-2017 for bank to confirm further tapering, Deutsche Bank strategists led by Francis Yared write in note.
  • Reduction in pace is “more relevant” than extension of QE as it signifies a “clear reduction” in total purchases
  • Recommends short 10Y France vs UST as peak in ECB policy easing is bearish for EUR rates
    • Japanese buying of French sovereign debt may slow significantly given less likelihood of central bank driving eurozone yields lower, UST and JGB yields higher
  • Maintain Buxl ASW tightener given wider spreads from collateral concerns, expected reduction in duration of future QE purchases
  • Maintain German 10s30s steepener as impact of QE flows suggests curve is currently 20bp too flat
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
2539Z GR (European Central Bank)

People
Francis Yared (Deutsche Bank AG)

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