MFS: ECB Strategy Review paves the way for further suppression of volatility in the EGBs space

MFS: ECB Strategy Review paves the way for further suppression of volatility in the EGBs space

9 juli 2021

ECB
europese centrale bank (ECB).png

Annalisa Piazza, Analyst at asset manager MFS, comments on the ECB Strategy Review.

Piazza: 'Although some dovishness of the Strategy Review was well expected (the symmetric target had been widely flagged for some time), we think some extra elements of dovishness have been added today.
Lagarde is leaving the door open for further forceful action, should the medium-term inflation not improve in the coming quarters. PEPP has been defined as 'forceful'. As such, we would not be surprised if the ECB maintains a similar tool (or adjusts the APP programme accordingly) until inflation consistently moves to 2% in the medium term. The doves within the ECB (i.e. Panetta and Lane) clearly achieved what they have often flagged recently.

In a nutshell, we expect the ECB to continue to absorb gross supply coming from the ongoing supportive fiscal policy (at least until the end of 2022) as coordination is so important. Market reaction was muted today as global drivers (i.e. lower UST yields and falling equities) prevail. That said, the Strategy Review paves the way for further suppression of volatility in the EGBs space for the next few quarters.'

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