market sitrep - macro opsmacro-ops.com/.../2016/06/market-sitrep-buying-spree.pdf · 2019. 12....
TRANSCRIPT
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Market SitRepBuying Spree
Macro Ops 1
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Topics
•ECB Buying Spree•Belgian Equities •Bad News Is Good News
Macro Ops 2
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ECB Buying Spree
Macro Ops 3
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Monetary Experiments
Macro Ops 4
“Our task is not to maximise the chances of price stability, under the constraint of not creating side effects. There are always side effects to monetary policy. And we are not at liberty to choose to fail our mandate.” -Draghi
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Why Experiment?
•Cause of this…
Macro Ops 5
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Asset Purchases
• In March of this year the ECB decided to increase asset purchases from 60 billion euros a month to 80 billion euros a month•They also added corporate bond buying which started on June 8
Macro Ops 6
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Specifics
•The ECB has said that they will buy investment-grade bonds from companies incorporated in the Eurozone excluding banks•They can buy up to 70% of a corporate issue•Of the 80 billion euro a month, analysts think 5-10 billion will go to these corporate bonds
Macro Ops 7
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Let The Games Begin
Macro Ops 8
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Let The Games Begin
Macro Ops 9
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Starting Big
•On June 8th the ECB bought big •Anheuser-Busch InBev 2028 bonds rallied the hardest •Yields opened at 1.4% and fell to 1.339% by the end of trading
Macro Ops 10
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The Risks
•Many investors think that because of ECB buying, corporate bond markets will become so illiquid that they are not tradeable•But as Draghi said, side effects are not a concern of his…
Macro Ops 11
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Belgian Equities
Macro Ops 12
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EWK
Macro Ops 13
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Under The Hood of EWK
Macro Ops 14
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ABI
•Anheuser-Busch InBev SA/NV is a multinational Belgian-Brazilian beverage and brewing company headquartered in Leuven, Belgium• It is the world's largest brewer and has a 25 percent global market share
Macro Ops 15
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Pushing On A String
•EWK breakout looks weak•Further efforts from the ECB are not working anymore•At this point Europe needs structural reform
Macro Ops 16
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DB About To Break Down
Macro Ops 17
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Bad News Is Good News Still
Macro Ops 18
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Reaction Function
Macro Ops 19
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Jobs Number
•Market expected 159,000 added• Instead it came in at 38,000•This immediately moved markets
Macro Ops 20
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Bonds
Macro Ops 21
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Gold
Macro Ops 22
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Silver
Macro Ops 23
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Dollar Index
Macro Ops 24
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Hike Off The Table
Macro Ops 25
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The Narrative
•Until this reaction function and central bank backstop narrative changes assets will continue to stay propped•For downside to play out in the U.S. we have to see a negative catalyst that changes the narrative
Macro Ops 26
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Easier Conditions To Stay?
Macro Ops 27
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