Halister News

(Bloomberg) -- Excess liquidity is not rising as fast as expected mainly because fluctuations in autonomous factors have also increased since the start of QE, leading to larger temporary falls in excess liquidity than in the past, BNP Paribas strategist Camille de Courcel writes in client note.

• As the rise in excess liquidity takes longer than expected, the widening in EUR/USD xccy basis will take more time
• 5-10y EURUSD xccy basis seem to be lagging behind with various regression models suggest they are currently 10bp too tight
  • Target -65/75bp in 5-10y tenors by March 2017 accompanied by a flattening of the 1s10s curve
• May have to wait until March 2017 for excess liquidity to reach EU1.4t should growth in excess liquidity remain largely dictated by QE, net of autonomous factors, and autonomous factors keep increasing at that pace