Saturday , 18 August 2018

MBS RECAP: ECB Surprises Markets, But Bonds Liked It

By Matthew Graham

Posted To: MBS Commentary

We knew the ECB (European Central Bank) was going to have to address its bond buying program soon, because it expires after September. Several speakers had alluded to the likelihood that it would be addressed in today’s announcement. Markets took that to mean that Draghi would finally talk about the probable tapering announcement at the subsequent meeting. Instead, the ECB just went ahead and pulled the trigger –several months in advance. In other words, they will indeed continue buying bonds through September. They’ll buy half as many over the next 3 months and then be done by 2019. This eventuality was somewhere in the realm of the market’s expectation, even if we weren’t planning on confirming it so soon. The early announcement caused a bit of bond market weakness at first…(read more)

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