Limited Take-up On ECB Stimulus Loans

Author: Ian Davis - Bullion Manager

Published: 16 Apr 2019

Last Updated: 17 Apr 2019

Mario Draghi of the ECB recently announced a round of fresh low interest loans to banks in the EU but there has been very limited take up. The loans are intended to provide large commercial banks more capital to write loans for households and businesses, but growing and sustained uncertainty is ruining appetite for debt.

The IMF has cut its growth outlook for advanced economies in 2019 and 2020 and highlight the importance of emerging markets as a source of positivity. Notably an end to financial turmoil in Turkey and Argentina add the potential for recovery and growth and all powerful China continuing their charge for economic world domination. Risks are ever present in emerging markets and worries still roll high if China’s recent efforts at stimulus fails to produce growth

German government bonds also known as “German Bunds” went on a price rally following acknowledgement by the ECB of a growth slowdown. Yields on the 10 yr bund dropped to -3.4 basis and these negative values means investors holding bonds for the full period are guaranteed to lose money.

The Euro also suffers to the backdrop the current slowdown with investors taking short positions at the highest levels since 2016

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