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ECB's Rehn The Latest To Play Down Need For TPI Deployment

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ECB’s Rehn showed little sign of worry over OATs, highlighting that the market has stabilised "relatively quickly". He also played down the need for intervention via the ECB's TPI mechanism although stressed the need to monitor the situation closely, echoing his peers.

  • This comes as the 10-Year Spain/France/Portugal butterfly stabilises above the 0 mark and the 10-Year OAT/Bund spread fails to close above 80bp.
  • These round numbers have been touted as potential long OAT RV entry points by some, although the persistence of French political uncertainty means that most of these calls/comments have been made with relatively low conviction.
  • RN has tried to placate worry surrounding its fiscal policy preferences, given the party’s history of calling for looser fiscal settings, which has promoted some OAT spread stabilisation this week.
  • The leftist political alliance's fiscal spending plans mean that a strong election showing from that group probably presents the greatest short-term OAT spread widening risk ahead of the upcoming lower house elections.
Fig. 1: 10-Year OAT/Bund Spread (bp)

Source: MNI - Market News/Bloomberg

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ECB’s Rehn showed little sign of worry over OATs, highlighting that the market has stabilised "relatively quickly". He also played down the need for intervention via the ECB's TPI mechanism although stressed the need to monitor the situation closely, echoing his peers.

  • This comes as the 10-Year Spain/France/Portugal butterfly stabilises above the 0 mark and the 10-Year OAT/Bund spread fails to close above 80bp.
  • These round numbers have been touted as potential long OAT RV entry points by some, although the persistence of French political uncertainty means that most of these calls/comments have been made with relatively low conviction.
  • RN has tried to placate worry surrounding its fiscal policy preferences, given the party’s history of calling for looser fiscal settings, which has promoted some OAT spread stabilisation this week.
  • The leftist political alliance's fiscal spending plans mean that a strong election showing from that group probably presents the greatest short-term OAT spread widening risk ahead of the upcoming lower house elections.
Fig. 1: 10-Year OAT/Bund Spread (bp)

Source: MNI - Market News/Bloomberg

Keep reading...Show less