11 April 2019 by jbchevrel
Today, the ECB pretty much dictated the price action for financials, one day after one of the less eventful meetings in its history. As expected, the ECB remained on hold, leaving its policy rates and forward guidance unchanged. Further details on the terms of the new TLTRO III announced last month weren’t forthcoming. Nor did Draghi mention the possibility of the ECB using ‘tiered deposit rate’, although he said the ECB would look into the possible side effects of negative rates policy, especially on banks’ profitability. Details on TLTRO3 are now expected at June meeting, neither before nor after. Today the ECB took DB CDS wider as some are reportedly dubious about the potential DB-CMZB coming merger. Earlier, CMZB board members were said to seek a meeting to end deal talks. DB is therefore the worst performer on the day (+2 on snr non pref. +8 on sub). BBVA lagged a bit on the back of Turkey’s underperformance, along with UCGIM, that also said it faces a possible fine related to a EC investigation into antitrust allegations. Later in the session, Senior Financials whipsawed on Reuters reporting that policymakers were sceptical over tiering negative rates. Klaas Knot also said that the new round of LTROs should be “more conservative and less generous”, failing to prevent financial CDS indices to tighten -2.6bp (Senior) and -5.3bp (Sub) respectively.