ECB: Don't rock the boat! - Rabobank

Analysts at Rabobank notes that ECB extended its QE by EUR 30bn/month at least until September 2018 and Draghi suggested corporate bond purchases will be cut less-than-proportionally, but still we could see further supply shortage building in several core markets in its meet yesterday.

Key Quotes

“The Governing Council has decided today to extend its asset purchase programme until at least September 2018, although at a reduced pace from January onwards. From the start of 2018, the monthly pace of purchases will be reduced from the current EUR 60bn to EUR 30bn. Whilst roughly in line with market consensus, it is a more dovish extension than we had expected the Governing Council to announce. As a result of this decision, an additional EUR 270bn will be injected into the markets, compared to our baseline of roughly EUR 180bn.”

“The relatively dovish extension and a strong focus on the reinvestments of proceeds from maturing bonds were bullish for Eurozone assets, and particularly for the periphery.”

“Guidance on (unchanged) rates was seemingly strengthened somewhat.”

“Clearly the ECB did not take the opportunity to mark a break with its current policy settings, suggesting there is still a fear to ‘rock the boat’.”