ECB meeting the highlight of the session

The ECB meeting and press conference was the highlight of the day with Lagarde striking a notably more cautious and noting that there was a unanimous decision to "recalibrate" the ECB's toolkit before the December meeting. Lagarde said that this did not rule out or in any measures and policies could be extended, increased or terms changed. The market took the view that this did not merely mean that the PEPP could be extended but that TLTRO terms could be tweaked and there could potentially even be a rate cut in December. Furthermore, Lagarde noted the flexibility of the PEPP and that the ECB had recently moved closer to the capital key than earlier in the crisis with its purchases and that purchases could deviate further from the capital key again during the second wave if needed.

• Peripheral bonds saw a bid, as did European bank stocks, while Bunds also moved higher before being the rally was pulled back by a sharp sell-off in Treasuries as more position squaring ahead of the US election took place.
• Bund futures are up 0.20 today at 176.27 with 10y Bund yields down -0.9bp at -0.636% and Schatz yields down -1.6bp at -0.810%.
• BTP futures are up 0.69 today at 149.70 with 10y yields down -6.3bp at 0.701% and 2y yields down -4.0bp at -0.365%.
• OAT futures are up 0.41 today at 170.18 with 10y yields down -2.1bp at -0.350% and 2y yields down -2.2bp at -0.739%.