US GOVTS: Peripheral EGBs on fire as ECB signals move away from capital key rules – IFR News
30-Jun-2016 11:34:24 AM
BOSTON, June 30 (IFR) – Today’s news so far is much more about what is occurring in Europe than stateside. A bit over an hour ago, BoE Governor Carney signaled that the BoE was likely to ease policy in various forms this summer. This unleashed a bull-steepening rally in the gilt complex.
News out of the ECB has it that because they are running out of eligible bonds to purchase in their QE operations, they are considering loosening up the capital key rules that essentially proportion ECB bond purchases to the amount of capital that each country has on deposit at the ECB. Loosening such rules will allow the ECB to buy more bonds from the peripheral markets. European peripheral yields are thus plummeting, with Italian and Spanish bonds leading the way lower by 19 and 18 bps, respectively, in the 10-year tenor.