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Santa Did Not Show Up At The ECB Meeting

03 December 2015 by lberuti

When people came into the office this morning, the level of expectations regarding the ECB’s meeting could hardly have been any higher. Investors were expecting a lower Deposit Facility Rate (-10bps to -0.30%), an extension of the QE program, and an increase of the amount of bonds the ECB buys on a monthly basis. They got a lower rate. They were a bit disappointed with a 6 month-extension of the QE program to March 2017 when some were expecting June. And they were not offered any amount increase, as the current rate of €60Bln a month will be maintained for now. The market reaction, which was muted in the first place, rapidly turned sour and risky assets got battered across the board in Europe. European equities closed 4% lower, credit indices closed well off their tightest levels (iTraxx Cross at 302bps and iTraxx Main at 73.5bps). Part of the recent outperformance of European indices compared with their US counterparts was handed back in the process.