Search this website. You can use fund codes to locate specific funds

The impact of ECB tapering on European markets

  • The ECB in 2018 will officially embark on QE tapering. Monthly purchases will be halved to €30bn over the first nine months of 2018. That is likely the final stage of the so-called APP.
  • The improved economic background provides a strong justification for ECB tapering. However, the approach will be cautious, given inflation is still undershooting the ECB’s target.
  • Tapering means that the ECB will continue to provide stimulus, only at a slower pace. Hence, unless markets interpret it as paving the way to a more aggressive normalisation (unlikely), the ECB stance will continue to exert downward pressures on bond yields, though with a lower intensity.
  • A model for European rates based on a set of economic and financial variables suggests that peripheral rates are more sensitive to bond purchasing than core rates. As purchases are reduced, the focus will shift back onto fundamentals.
  • The impact on European rates (and European financial assets in general) from ECB tapering is likely to be limited next year, which supports our ‘new normal’ view of low-for-longer global rates.

Related articles

Building back better: why climate action is key to a resilient recovery
Fiorino: in this pandemic, asset quality is key to banks' health
G4S case study
Gemologist: can we adapt to a new climate normal?
Portfolio triage: Market Risk Insights, Q2 2020
Global Emerging Markets: ESG Materiality, Q2 2020

Sales contacts

Paul Voute, Head of European Business Development