Natixis: Wie tief kann der Leitzins noch fallen?

Although the scope of the above measures exceeded most market participants’ expectations, the market reaction has been muted so far, perhaps as investors await US employment figures. The ECB has sent the resounding message that it will continue to take the necessary measures to combat low inflation and deflation in certain Euro-zone countries. In addition to lowering rates across the board, the bank committed to making cheap loans on the condition that banks lend more to the private sector (the take-up at the first two of eight operations is estimated at EUR 400 billion). The ECB also indicated it would intensify its preparation to embark on quantitative easing measures, purchasing asset-backed securities at a date to be announced.

What does yesterday’s announcement imply for interest rate strategies?

Over the past few months, Natixis AM’s interest rate forecasts have pointed to lower rates and lower spreads, despite the fact that consensus data and market sentiment maintained persistent expectations for higher rates, linked more to higher US rate expectations. Lower rates and spreads have been built into our central scenario, and our in-house model recently pointed to 1.32% as fair value for the 10 year German Bund, a level which the market subsequently reached in recent weeks. Throughout this period, our interest rate strategies have privileged neutral to long durations, a view that has been rewarded since the start of the year but which has only recently gained traction in the market place. Indeed, leading up to the ECB announcement, we have observed a decisive shift in investor positioning to long duration; the last time this kind of market reversal happened was in 2012.

However, contrary to broader market positioning, we remain more defensive than the consensus and prefer a neutral duration posture, because our reading of the BCE announcement implies bearish risk for bonds as well. Our interpretation is that the ECB has sent a strong statement to investors that they will do “whatever it takes” to extract the Euro-zone from anemic inflation or deflation in certain countries. The effect on ten-year yields should send them back into the lower end of our 2014 target range of 1.50%-2.25% for the 10-year German Bund. As such, this combination of an extremely bullish market on the back of ECB messages represents an opportunity to reduce duration exposure in our portfolios as rates should drift higher into the above range. Toward the end of 2014, we could touch the higher end of this range as US yields should reflect anticipations for 2015 FOMC tightening.

Die vollständige Meldung im pdf-Dokument