Citi Flag Their Pre-ECB Set Up

Citi write “the ECB has plenty to debate on Thursday, but perhaps little to decide.”

• They suggest:
• “The market is going above and beyond what the ECB asked of it with additional tightening: the ECB is unlikely to allow a persistent rise in real yields and we stay long in 10yr”.
• “The debate on PEPP QT is likely to at least start (and an eventual compromise might be an early start but a longer taper), potentially taking 10yr BTP-Bund past 210bp.”
• “We don’t expect any announcement on changes to reserve requirements anytime soon, but the debate will remain lively.”
• “Elsewhere, we enter shorts in 1y1y HICP swaps after the oil-induced rally looks overdone and note the slow NGEU disbursement at the halfway point of its life.”