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Summer Lull Already?

05 July 2017 by lberuti

After last week sell-off in rates, central banks have learnt their lesson and speeches delivered over the last few days have left no room for ambiguity. ECB’s board member Praet preached for patience at the central bank, insisting that inflation still needs “more time to show through convincingly in the data”. And fellow board member Notowny said that the ECB should “normalize as soon as the economy allows” but that at the same time he “expects a long period of low rates”. At the same time, geopolitical worries are back, and the confirmation that North Korea had fired an intercontinental ballistic missile yesterday marked a new escalation in the country’s stand-off with the US. These counteracting forces have kept volatility to a minimum in the credit space over the last days. Today’s session certainly had a summer lull feeling about it, but the current equilibrium could be more fragile than it seems.