21 July 2016 by lberuti
The highlight of the day was always going to be the ECB meeting. On the surface it failed to deliver any real excitement. Mr Draghi made sure to mention that they would consider adding fresh stimulus later this year when a clearer picture of the economic impact from the UK’s vote to leave the European emerge. That was enough to send iTraxx Main to its tightest level of the year, but the move on the day is only 1.5bps. He also spoke about Italian banks and non-performing loans (NPLs) as questions were inevitably asked during the press conference. Mr Draghi does not think that there is a functioning market for NPLs at the moment. This probably means that a 20cts bid for Monte’s sofferenze would not be a fair market price. He was clear that he does not want banks to fire sale their NPLs and he told reporters that a public backstop would be “very useful”. That point did not escape investors, and they sent iTraxx Financial Subordinated 15.5bps tighter at 200.5bps.