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Daily Archives: 11th March 2020

11th March 2020

🗞️ Why Shock and Awe gives the UK every chance

MARKET CLOSE:
iTraxx Main

103bp, +2.2bp

iTraxx X-Over

476bp, +16.4bp

🇩🇪 10 Yr Bund

-0.75%, +5bp

iBoxx Corp IG

B+170bp, +1bp

iBoxx Corp HY

B+570bp, +28bp

🇺🇸 10 Yr US T-Bond

0.81%, +6bp

🇬🇧 FTSE 100

6049.62, (-1.73%)
🇩🇪 DAX

12489.46, (-0.04%)
🇺🇸 S&P 500

3152.05, (-0.65%)

ECB/EU needs to dish out the same…

The proactive 50bp cut by the BoE, seen in their eyes as the financial system being part of the Covid-19 solution, took markets by surprise. At the same time, it has suddenly heaped additional pressure on the ECB, and Lagarde & Co will need to be as decisive.

The financial measures are not a cure for the Covid-19 virus pandemic but are in place to limit the negative effects of the economic impact and give rise to hopes of a V-shaped recovery – when it comes.

So this is not the time for the ECB to be tinkering around the edges with a paltry move of, say, a 10bp or even 20bp rate cut. Admittedly, the rate cuts are in part about keeping the markets ‘happy’ because small businesses and the like across Europe have long been struggling, for reasons not tackled from the 2008 crisis. Europe has never really recovered.

However, a confidence-boosting 25bp cut (or more) along with other, broader measures to get credit flowing through the Eurozone’s financial system quickly are recognised as being of the utmost urgency.

Thus a coordinated effort with the EU, allowing for a fiscal boost would add to and play into the broader ‘kitchen-sinking it’ narrative. A combined fiscal and monetary package will be well received.

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