Expectations were all over the board for today's European Central bank policy announcement, as well as the characterization of future policy potential at the press conference later in the morning. That said, there was a consensus level of 'action' that included a high chance of rate cuts, a good possibility of LTROs, and almost no likelihood (but some hope) for asset purchases. The ECB basically did all of those things--no more, no less.
With no expectation for an actual announcement of QE, there was significant interest in ECB President Mario Draghi's treatment of the topic during the press conference. In other words, market participants mostly assumed today's actual policy changes and were actually more interested in hearing how the ECB's approach might be evolving.
When Draghi began speaking, he looked physically awful--like a guy with the flu who also happens to be nervous about breaking some bad news. Compared to his usual self, he seemed tired, apprehensive, and defeated.
Maybe it's just been a long week for Mario, because there were no salient disappointments in the press conference. Though it was minimal, he even reiterated the committee's ongoing work on an asset purchase plan. Still, markets continued to brace for impact until he stood up and ended the Q&A. At that point Treasuries and MBS moved into positive territory, and have been trending higher in price ever since.
From a day-over-day standpoint, the gains aren't eye-watering--10's are only down 2.5bps and MBS up only a quarter of a point. But from the morning's weak moments, the rally is bona fide--chalking up more than half a point in price gains. More than a few lenders based rate sheets on prices that were closer to the lows of the day. They've since repriced positively.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing
is available via MBS Live.
| MBS || |
98-03 : +0-07
102-14 : +0-07
105-19 : +0-07
| Treasuries || |
0.3829 : -0.0161
2.5823 : -0.0237
3.4286 : -0.0154
| Pricing as of 6/5/14 12:30PMEST |
Morning Reprice Alerts and Updates
11:59AM : Ongoing Positive Reprice Potential
10:22AM : Bond Markets Turn Green After Draghi Stops Talking; Positive Reprice Potential for Some
8:52AM : ALERT ISSUED: Bond Markets Weaker; Underwhelmed by ECB, Draghi
Live Chat Featured Comments
Charles Tadros : "big swing from lows to highs so far"
Michael Gillani : "And I guess with recent past as example, ADP's miss sheds absolutely no light on NFP tomorrow really."
Michael Gillani : "NFP has the big bat now."
Andy Pada, Jr. : "I guess we move on to NFP"
Jason Harris : "I would think that would be a pretty powerful tool to get money moving...."
Matthew Graham : "well, to be fair, he did say QE was unlikely weeks ago, and he did just cut a deposit rate below zero, which is a first among the big 4 (ECB, BOE, BOJ, FED)"
Sung Kim : "Bleh. Looks like another draghi head fake"
Matthew Graham : "imagine FOMC statement that said "further measures will be announced later.""
Matthew Graham : "RTRS - ECB SAYS FURTHER MONETARY POLICY MEASURES TO BE ANNOUNCED IN STATEMENT LATER"
Andrew Horowitz : "the big question is the QE move"
Jeff Anderson : "Within their range of possible cuts, right?"
Matthew Graham : "as-expected so far, except refi rate, but not that important"
Matthew Graham : "RTRS- ECB SAYS CUTS INTEREST RATE ON DEPOSIT FACILITY TO -0.10 PCT (REUTERS POLL -0.10 PCT)"
Matthew Graham : "RTRS - ECB SAYS CUTS BENCHMARK REFINANCING RATE TO 0.15 PCT (REUTERS POLL 0.10 PCT)"