Jakob Christensen, chief analyst at Danske Bank, notes that yesterday’s ECB watchers conference shook markets as the comments from Mario Draghi, Peter Praet and Luis de Guindos on attention to banks’ profitability fuelled with a Reuters ECB-sourced story sent yields lower.
Key Quotes
“Their comments predominantly focused on the weak banking sector profitability and what ECB could do to mitigate this. However, it was not until the Reuters story around 14:00 CET that the significant market move took place.”
“This morning, Praet said that ECB staff are looking into the possibility of a tiering system should a monetary policy reason warrant that. That also means that all options to mitigate the side effects from the negative deposit rate are on the table. However, we expect next step from ECB is announcing the TLTRO3 modalities, which could be made very favourable, should they find the need before a tiering system were to be announced.”
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