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11th September 2019

Boneheads? Hmmm, quite

MARKET CLOSE:
iTraxx Main

49.6bp, unchanged

iTraxx X-Over

248.9bp, +2.4bp

🇩🇪 10 Yr Bund

-0.57%, -2bp

iBoxx Corp IG

B+126bp, +2bp

iBoxx Corp HY

B+417bp, +2bp

🇺🇸 10 Yr US T-Bond

1.74%, +4bp

🇬🇧 FTSE 100

7167.95, (-0.61%)
🇩🇪 DAX

12670.11, (+0.32%)
🇺🇸 S&P 500

2989.69, (-0.21%)

More sticky plaster, please…

Negative rates are not natural and nature has a habit of expunging such aberrations. So, an ECB 20bp rate cut must be in the bag! All that’s left to ponder is whether any accompanying QE is for €15bn to calm the dissenters, or €30bn to give the markets a turbo boost.

For investors, we think it’s a case of ‘buy the rumour, sell the fact’ – or, just keep buying. For sure, if the ECB announces intentions to get involved, the recent sell-off in rate markets will be reversed and -0.75% will be back in view for the 10-year benchmark Bund yield, with -1.0% coming thereafter. The ECB will provide the catalyst/answers on Thursday.

We’re about to find out how motivated the central bank is to give the economy what might be a final push in its attempt to lift it out of the doldrums, or – at worst – it’s a case of stemming any further declines as global macro continues to slow.

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