G3 Recap 3-28-11

US Data:

  • US Core PCE rose to 0.9% YoY in Feb as expected, vs 0.8% previously.
  • Personal Spending was strong, rising 0.7% MoM in Feb vs 0.5% expected and 0.2% previously. However, Personal Income was a bit weaker at 0.3% MoM vs 0.4% expected, even as the prior print was revised upward from 1.0% to 1.2%.

Europe:

  • Both Merkel as well as Sarkozy suffered political set backs this weekend, as their political parties lost ground. Merkel’s coalition got only 44% of the vote, losing an area it had ruled over for the last 60 years. The center-left opposition, composed of the Greens and their Social Democratic Party allies, won over 47% of the vote.
  • ECB preparing new emergency liquidity facility to provide financing to Europe’s troubled banks over an extended period; the new facility will replace the existing ELA (Emergency Liquidity Assistance) and is said to be designed specifically for Ireland’s banks.
  • The Irish Times reports the ECB is preparing a EU60B emergency financing to provide Ireland’s banks with medium-term “liquidity” loans. The package is being worked on ahead of the stress test results due out this week for the country’s banks.
  • Ireland’s bank stress tests will reveal a EU20B capital hole that needs to be filled; analysts had expected the losses to be around EU25B. Ireland will publish the stress test results on Thursday.

Commentary:

  • None
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2 thoughts on “G3 Recap 3-28-11

  1. all this stuff with portugal and ireland makes me think that if we do get an ECB rate hike next week (most likely than not) then they should simultaneously announce that they will go back to the old 1% corridor from the current 75bp.

    so the new band will be 25bp to 225bp with base at 125bp. they may very well continue decreasing term repo funding but ultimately, the overnight rate will continue being a function of (excess) overnight liquidity and for time being that may not be materially offered. point being, base rates may go up, but overnight could actually stay where it is if not actually drop …

    from a positioning perspective i’d imagine folks have been paying short dated ois both locking in term funding and betting on normalization of eonia and ecb date steps … overall i’d imagine the ecb would want to convey a further baby step towards normalization rather than take large bold strides which might catch people off guard.

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