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What Analysts Are Looking For In Draghi's Announcement Today

Tyler Durden's picture




 

There is far less on the ECB table today compared to a month ago when expectations were massive and Draghi didn't fail to satisfy (with the usual set of half-baked, non-existant programs a la the OMT which still doesn't technically exist, 2 years after it was first revealed) and nobody expects any major announcements out of Mario Draghi. If anything, the market hopes the ECB head will use the press conference today to elaborate on the missing technicalities of the TLTRO. With inflation printing at 0.5% again, concerns of deflation will likely be mentioned once again. When it comes to the EUR reaction, the most bearish case would be for Draghi to discuss QE, and providing details of how a bond monetization operation would look like. More than the EURUSD, a bigger risk lies for peripheral bonds which are at risk if Draghi unveils details of TLTRO today that could hurt the periphery carry trade.

Here is what various sellside firms believe could be the outcomes of today's press conference, via Bloomberg:

RBS

  • Any prevention of the TLTRO being used for government bond carry trade is the biggest risk for periphery today, write strategists in a note
  • Expect Draghi to be vague on the treatment of government bonds and perhaps reference the ECB’s new regulatory powers

BNP Paribas

  • EGB market will pay close attention to any further details on the TLTRO, strategists write in a note
  • Environment could turn volatile in early afternoon as U.S. payrolls data released, which could support core bonds with periphery still at risk

Barclays

  • If the ECB fails to refresh confidence around its already announced measures, weakening of peripheral bond trading in recent days could continue a bit longer, writes strategist Cagdas Aksu in a note
  • ECB could provide some information on the technical details of the TLTROs, as well as the date of their allotment in Sept. and Dec.
  • ECB may also provide some technical details on the benchmark levels that will determine quarterly TLTRO borrowing in 2015 and 2016

Citigroup

  • There is a high level of anxiety in the markets with regards to additional TLTRO details that might make it more difficult for banks to hold funds for a “long period,” writes strategist Alessandro Tentori in a note
  • Together with strong U.S. data, a neutral ECB could result in some profit-taking on carry trade positions that have been very successful since the start of this year
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Thu, 07/03/2014 - 07:27 | 4920833 Fuh Querada
Fuh Querada's picture

Again, aggressive waiting is indicated.

Thu, 07/03/2014 - 07:54 | 4920864 Ghordius
Ghordius's picture

aggressive YAWNING is probably even more indicated. those analysts make out of a few words of Draghi the matter of great suspense and basis of "great decisions". I presume it helps making the case for their bonuses. is the "war for talent" still going on, among the megabanks? if yes, did they find any?

Thu, 07/03/2014 - 07:37 | 4920846 buzzsaw99
buzzsaw99's picture

draghi: would you like a suckle off my nirple?

Thu, 07/03/2014 - 07:51 | 4920860 Ghordius
Ghordius's picture

lol, that's a good one. the funniest thing about NIRP is that it is against bank's interests. they have to pay for the "cash parking lot". or find something different to do with all that cash. seen this way, it shows who is "the boss" in the relation between the eurozone's national banks aka ECB and the eurozone's banks

feel free to make the conclusion regarding other monetary zones and if they will ever see any NIRP

and before you think I am in favour of this idiotic low-rate environment: nope, I don't see any other option. thanks, China, Japan, USA, etc. for forcing the whole world in this mess of currency wars and ultra-low rates. hope you are happy with the results

Thu, 07/03/2014 - 08:39 | 4920967 ThirdWorldDude
ThirdWorldDude's picture

Sweden's gotten mightily close to NIRP this morning.

And Ghordo, thank BIS and CBs shareholders for this idiocy. It's a joint effort leading to a centrally-planned worldwide phenomenon.

There. Is. No. Fuckin'. Escape.

Thu, 07/03/2014 - 08:05 | 4920881 Bernoulli
Bernoulli's picture

Citigroup: "Together with strong U.S. data..."

WTF?? What strong data do they have that I don't? GIMME DIS DATA, DAMMIT!

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