G3 Recap 4-07-11

Main Items:

  • ECB hiked 25bps as expected, but they did not adjust the width of the corridor. Some Trichet comments:
  • Inflation risks remain on the upside, Growth risks remain balanced
  • Monetary policy is accommodative (dropping ‘very’), and Trichet is back to ‘monitor very closely’ vs ‘strong vigilance’
  • Decision was unanimous but they didn’t decide that today’s hike was the first of a series

BoE kept policy unchanged as expected.

US Initial Jobless Claims was basically flat at 382k last week vs 385k expected and 388k previously.

Portugal’s PM Socrates confirmed that it would be making a request for assistance to the EU. While no details of the package are available yet, estimates of its size are up to €80-90bn. Comments by opposition leader Pedro Passos Coelho indicates that he supports the request for liquidity assistance. JPM estimates that 60bn will be enough to tide Portugal over until mid 2014. Pretty much every research piece I read expressed the view that this will not impact Spain.


  • UK NIESR GDP Estimate improved to 0.7% for March from 0.2% previously
  • Australia Construction PI declined to 29.4 in March vs 44.6 previously
  • Australian Employment rose 38k in March vs 24k expected and -10k previously, which took the UE rate down to 4.9% from 5.0% expected and previously


  • The first G3 CB hike came and went without event. Given market reaction, however, it is safe to say that the outcome was less hawkish than expected. Given that ECB days have historically coincided with local yield peaks, this suggests that we are likely to see a bit of a retracement over the next couple weeks, in a likely repeat of the prior couple months: (German 5yr government yields in blue below)