Many consider the EU bond sell-off in Europe an ECB taper tantrum; nevertheless, there was nothing that would suggest that the ECB would change course with their QE bond buying program except for better economic number. The ECB has not said it was data dependent like the Fed. In fact, the ECB will front-loaded some buying ahead of the summer season.
With the US markets also selling off, the spread between the two markets has closed but it is still not anywhere near the levels seen three years ago. If we mark the taper tantrum as a key point in May-June 2013, the spread difference is mainly about the differences in policy. The widening of the spreads was associated with the realization that the ECB would follow a QE programs and the Fed would start normalization.
A delay in a Fed rate rise will close the spread gap. A view that the plans of the Fed are back on track will lead to a widening or at least a stable spread. Watch the spread and you wilt a feel for European expectations on Fed behavior.
No comments:
Post a Comment