ECB: Unreasonable to expect launch of fresh initiatives - BBH

Research Team at BBH, suggests that the ECB meeting is expected to set the tone for today’s North American session. 

Key Quotes

“The ECB meeting features new staff forecasts.  Given the firmness of oil prices, with Brent again testing the $50 a barrel level, there may be some scope to revise up the staff's 0.1% forecast for this year.  The GDP forecast of 1.4% seems less subject to change.

We have argued that it is unreasonable to expect the ECB to launch fresh initiatives.  This conclusion does not arise from any belief in a secret agreement.  Rather, it is due to the fact that the ECB has not implemented all the measures announced in March, a fortnight after the G20 meeting in Shanghai.  The corporate bond purchases can begin as early as next week, while the new TLTRO is also to be launched this month.  Even after implementation is underway, new measures are unnecessary until the impact of the existing program can be fairly evaluated.  This will keep the ECB on the sidelines for at least Q3 and possibly Q4.

We suspect the ECB is not quite ready to reinstate a waiver to allow Greek bonds to be used as collateral.  Technically the review of Greece's progress may not be over until Athens makes some legalistic adjustments to some of its already approved measures.  Greek 10-year yields have risen a few basis points this week.  After briefly trading below 7% last week, Greece's 10-year yield finished last week near 7.26% and is quoted near 7.30% today.  A decision to include Greek bonds in the ECB's sovereign bond buying program may take more time (and the paydown of more debt owed to the ECB).”