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25 Jan 2016
ECB deposit rate cuts to muddy waters further - BBH
FXStreet (Guatemala) - Analysts at Rabobank explained that greater clarity from President Draghi as regards the possibility of a further ~10bps cut in the deposit rate and the potential for an expansion of the QE programme over the coming months may well serve to muddy the waters further still for those looking to fund in EUR in the near term.
Key Quotes:
"In spite of prevailing, challenging market conditions, increasing regulation and liquidity constraints, the need to cover redemptions in currencies other than EUR and the desire to capitalise on New Year demand has seen issuers bound in regardless, offering new issue premiums and front- loading deals while the opportunity exists."
Investors meanwhile have begun the year as they ended the last, demanding new issue premiums, forcing issuers to pay up in order to compete and get deals done. Issuers know full well that investors will ‘happily’ wait on the side-lines until they achieve desired targets. The impact on secondary levels is inevitable.
If the current shortage of new EUR denominated issuance persists then it would be natural to assume that this process will speed up, especially as thoughts turn increasingly to further deposit rate cuts from the ECB."
Key Quotes:
"In spite of prevailing, challenging market conditions, increasing regulation and liquidity constraints, the need to cover redemptions in currencies other than EUR and the desire to capitalise on New Year demand has seen issuers bound in regardless, offering new issue premiums and front- loading deals while the opportunity exists."
Investors meanwhile have begun the year as they ended the last, demanding new issue premiums, forcing issuers to pay up in order to compete and get deals done. Issuers know full well that investors will ‘happily’ wait on the side-lines until they achieve desired targets. The impact on secondary levels is inevitable.
If the current shortage of new EUR denominated issuance persists then it would be natural to assume that this process will speed up, especially as thoughts turn increasingly to further deposit rate cuts from the ECB."