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March 10, 2017 By Peter Boockvar

ECB Interest Rate Discussion

The euro is rallying to the highs of the day at $1.065 on the Bloomberg story that:

“ECB policy makers considered the question of whether interest rates could rise before their bond buying program comes to an end, according to people familiar with the matter.”

This was followed though with:

“The council didn’t discuss any specific scenario or timeline and hasn’t made any formal decisions on a strategy.”

We know the playbook the Fed took. Step 1, end QE. Step 2, slowly raise rates. The ECB though has a different situation as so much funding takes place via banks more so than the capital markets. The story is sending European sovereign yields to the highs of the day also . The 10 yr yield is now up 4.2 bps to .47% (the recent peak is .48%). Short end yields that are negative are the most vulnerable of course and the 2 yr note yield is higher by 2 bps to -.83%. Yields are negative out to 7 years in Germany and the 7 yr yield is higher by 5 bps to -.04.

This all said, it should surprise no one that they discussed it and this story doesn’t solve at all as to when negative interest rates may actually disappear. I’ll repeat again though, the ECB has created a monster in the European bond market and we are seeing early signs that the tree is beginning to shake.

Filed Under: Central Banks

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About Peter

Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor. Each day The Boock Report provides summaries and commentary on the macro data and news that matter, with analysis of what it all means and how it fits together.

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Disclaimer - Peter Boockvar is an independent economist and market strategist. The Boock Report is independently produced by Peter Boockvar. Peter Boockvar is also the Chief Investment Officer of Bleakley Financial Group, LLC a Registered Investment Adviser. The Boock Report and Bleakley Financial Group, LLC are separate entities. Content contained in The Boock Report newsletters should not be construed as investment advice offered by Bleakley Financial Group, LLC or Peter Boockvar. This market commentary is for informational purposes only and is not meant to constitute a recommendation of any particular investment, security, portfolio of securities, transaction or investment strategy. The views expressed in this commentary should not be taken as advice to buy, sell or hold any security. To the extent any of the content published as part of this commentary may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. No chart, graph, or other figure provided should be used to determine which securities to buy or sell. Consult your advisor about what is best for you.

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