iBankCoin
18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
20,692 Blog Posts

DRAGHI SURPRISES MARKETS WITH MORE QE; EUROPEAN SPREADS BLOW OUT

In a surprise move, the ECB announced they would not end QE, as scheduled, in March of 2017 — but instead extend it through December of 2017 — albeit at a slightly slower pace. Instead of tossing 80b euro per mo into a flaming barrel of garbage, they’ll toss just 60.

The subsequent result is a profound blowout between short duration govt bonds and long — a widening of the yield curve if you will. This is extremely bullish for European banks.

german

Additionally, the euro is down 1% v the dollar and bank stocks are raging higher.

The Eurostoxx 50 is higher by 1.7% — led by BBVA +5.2%, Intesa +5%, Santander +4.6% and Deutsche Bank +3.1%.

Italian banks are soaring too. Banca di Milano Scarl +8.8%, Banco Popolare +8% and Unicredit +5.8%.

Bear in mind, the primary driver for the US bank rally was the widening of the yield curve, the spread between the 2s and 10s, from 70bps to 128bps. Right now in Germany, the spread is around 113bps — with the 2yr bogged down at -0.71%.

And this.

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6 comments

  1. formergeek

    These “Surprises” always seem to be just like the previous “surprise”. 1984 sure took awhile but it’s finally here.

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  2. boyaj

    So yields on the long end are running to the upside due to boogeyman Euro inflation expectations? Or do you see this as more of a function on the shorter end celebrating moar QE?

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  3. boyaj

    Also (and completely changing the subject), what does it mean to be a “leaf”? I feel like I’m 8 years old and asking my buddy’s older brother what sex is…

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  4. zola

    Maybe the next step is for Super Mario to assist the Wops into squishing all their Zombie banks into one Pastafarian union – call it “Rigatonia a la Bankia” (think Saltimbocca a la Romana”). Then put out a call for the Proles to BUY IN to a new stock offering – call it “fritte dolci” to collect for extra support sauce for the Banksters.

    Beats thinking that this is just another ploy to lure Proles into signing up for more debt slave contracts, while supporting the elites in extending ever bigger and better promises to the great unwashed, while the demographicers silently slide down the contracting slope of deflationary downness (i.e. growthnyet).

    There. The use of NYET in this discussion guarantees a stamp of FAKE NEWS. Mission accomplished.

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