Capital Markets, Financial

BGC Partners eyes new platform to trade US Treasuries

BGC Partners plans to launch a new platform to trade US Treasuries early next year, in a bid to return to a market in the middle of evolution, according to people familiar with the plans.  The company, spun out of Howard Lutnick’s Cantor Fitzgerald in 2004, sold eSpeed, the second-largest interdealer platform for trading Treasuries, […]

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Financial

Sales in Rocket Internet’s portfolio companies rise 30%

Revenues at Rocket Internet rose strongly at its portfolio companies in the first nine months of the year as the German tech group said it was making strides on the “path towards profitability”. Sales at its main companies increased 30.6 per cent to €1.58bn while losses narrowed. Rocket said the adjusted margin for earnings before […]

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Currencies

Renminbi strengthens further despite gains by dollar

The renminbi on track for a fourth day of firming against the dollar on Wednesday after China’s central bank once again pushed the currency’s trading band (marginally) stronger. The onshore exchange rate (CNY) for the reniminbi was 0.28 per cent stronger at Rmb6.8855 in afternoon trade, bringing it 0.53 per cent firmer since it last […]

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Currencies

Nomura rounds up markets’ biggest misses in 2016

Forecasting markets a year in advance is never easy, but with “year-ahead investment themes” season well underway, Nomura has provided a handy reminder of quite how difficult it is, with an overview of markets’ biggest hits and misses (OK, mostly misses) from the start of 2016. The biggest miss among analysts, according to Nomura’s Sam […]

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Property

Spanish construction rebuilds after market collapse

Property developer Olivier Crambade founded Therus Invest in Madrid in 2004 to build offices and retail space. For five years business went quite well, and Therus developed and sold more than €300m of properties. Then Spain’s economy imploded, taking property with it, and Mr Crambade spent six years tending to Dhamma Energy, a solar energy […]

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Markets question ECB bond-buying outlook


Posted on October 4, 2016

epa05530315 Mario Draghi, President of the European Central Bank (ECB), speaks during the ECB press conference in Frankfurt am Main, Germany, 08 September 2016. EPA/ARNE DEDERT©EPA

The eurozone bond market was rattled on Tuesday by concerns that the European Central Bank might be contemplating how to scale back its quantitative easing programme, sending yields sharply higher and contributing to the worst day for gold in over a year.

The euro also jumped higher versus the dollar after Bloomberg reported — citing unnamed officials — that the ECB might wind down its bond purchases in steps of €10bn a month. The ECB’s €80bn monthly current QE programme is due to end in March 2017.

    An ECB spokesperson told the Financial Times that the ECB’s Governing Council “has not discussed these topics, as President Mario Draghi said at the last press conference and during his recent testimony at the European Parliament”, and the Bloomberg report stated that policymakers might still extend the whole bond-buying programme.

    But given how most investors have expected the ECB’s monetary stimulus to be extended and perhaps even enlarged, even the discussion on how it might eventually be gradually scaled back sent shivers through the eurozone government bond market.

    The 10-year government bond yields of Germany, France, Italy and Spain all jumped about 4 basis points, the euro clawed back its earlier losses to trade flat on the day at $1.1205 and the price of gold — which has been buoyed by central banks pushing interest rates and bond yields into negative territory — deepened its decline to 3.3 per cent.

    If the ECB does decide to trim its €80bn a month QE programme in €10bn steps then it would mirror the Federal Reserve’s strategy in unwinding its own bond-buying programme in 2013. That initially caused a sharp jump in US bond yields, and Janus Capital’s Bill Gross said on Twitter a similar ECB “taper tantrum” was now also under way.

    Barclays’ economists predicted that the ECB would choose to purchase less than €80bn of assets a month after its March meeting, but stressed that the central bank would “need to manage communication carefully to explain that reducing the amount of monthly purchases while maintaining it for an undefined but long period is not tapering. Firmer QE forward guidance could help to address market perceptions of tapering.”

    Euro and Bund yields jump on ECB talk

    FTSE 100 soars as pound hits 31-year low

    Nonetheless, any formal talk on whether to extend — or taper — asset purchases is yet to begin and a decision to reduce asset purchases remains far from the baseline scenario. Neither the ECB’s governing council nor its executive board, composed of the bank’s top six officials and headed by president Mario Draghi, has discussed the matter yet.

    The council is currently meeting in Frankfurt, but the topic of QE is not on the agenda. The ECB is expected to make a decision on how it plans to continue with QE past the current end date of March 2017 around the turn of this year. Committees of eurozone central bankers are working on ways that the design of the programme could change to compensate for a scarcity of eurozone government bonds that are eligible for the ECB to buy.

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    David Joy, chief market strategist at Ameriprise Financial, said markets were most likely misinterpreting Bloomberg’s story as a hint of an upcoming tapering, rather than simply as a discussion of how the ECB will eventually scale back the programme, most likely instigated by some of the more hawkish officials.

    “It’s had a pretty significant impact on markets, but the ECB is just saying what they will do when they want to end the programme, and they’re probably nowhere near that,” he said.