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That Was Not The Script

25 July 2019 by lberuti

Today’s session was all about the ECB meeting and the following press conference held by Mr Draghi. The central bank did not break ground and confirmed what had been anticipated by the market: interest-rate cuts (with tiering to help banks), new forward guidance and QE. But all that will have to wait until September. The credit market, which had started the day on a weak note, welcome the news and risk premia were indicated sharply tighter. But during his press conference, Mr Draghi failed to offer more details. In fact the Governing Council did not discuss issue or issuer limits, a key element to any new asset purchase program, and it also appeared that its members are not all fully on board with all the parts of the proposed package. It could make for a tough meeting in September. So much so that a reversal materialised during the press conference, which pushed credit indices meaningfully off their tightest levels, and even wider on the day.