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(Z1) Bearish Focus


Some Reasoning For The Risk-Off Feel


(Z1) Volatile But Remains Bearish


(Z1) Needle Still Points South


Risk-Off Flows Seen

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  • Bank of Greece Governor Stournaras said in an interview with Politico (available here) that is is his "expectation" that the ECB will to continue to buy Greek government bonds (GGBs) after PEPP ends, by including GGBs in the APP.
  • There has been nothing official regarding this to date, the only investment-grade debt eligible for APP (the highest Greece is rated by any of the four ratings agencies the ECB recognises is BB so two notches off BBB-).
  • These are the most explicit indications that Greece will be included in the APP, but as they come from the Bank of Greece Governor they need to be taken with a pinch of salt.
  • After a period of trading at a tighter spread to Bunds than BTPs (capitalised on by the PDMA as they issued in early September), Greek spreads to 10-year Bunds widened to over 120bps but have since tightened back to around 112bps, albeit wider than BTPs.
  • Stournaras' comments about wider ECB policy were on the dovish end of the spectrum as he said that ""It would be really arrogant on our part to declare victory over the pandemic right now... That's why it is too early to draw conclusions about the extension or not of the PEPP beyond March 2022."
  • He also said that "The APP, for instance, may need to be recalibrated... To avoid any cliff effect, the APP would benefit from higher purchase volumes and from some important flexibility features of the PEPP. Our experience with the PEPP has shown that by being flexible... we've achieved significant results with regard to inflation and output at lower purchase volumes."