by Tyler Durden
Thursday, Mar 11, 2021 - 07:27 AM
After touting the flexibility of its asset purchase program for preserving favorable financing conditions, the European Central Bank has been surprisingly inactive in the face of the recent bond market rout, with its net bond purchases declining in the past two weeks. According to Bloomberg economist Maeva Cousin, ECB President Christine Lagarde is set to reiterate this flexibility today, but she now seems unlikely to signal its imminent use.
That will leave the Governing Council facing increased scrutiny of its reaction function.
Some thoughts:
The ECB has emphasized its intention to preserve favorable financing conditions to support the recovery. Anticipate a clear message from the Governing Council that a substantial part of the recent increase in bond yields is unwarranted.