Global economic growth has been slow and inflation has been stubbornly low despite efforts by central banks to raise them. The first round of unconventional policy involved central banks buying bonds and other assets and increasing their balance sheets. The strategy has only been moderately successful and is probably at the point of diminishing marginal

Negative interest rates.   Hmmm. I’ve seen this kind of liquidity provision before…   Now I remember!              

Policy: In December, the ECB extended QE from September 2016 to March 2017. Markets did not think it was sufficient, spreads between peripheral bonds and bunds widened, the EUR strengthened and equity markets sold off. In late January the BoJ cut rates into negative territory and was rewarded with a stronger JPY and weaker equity

The ECB’s moves were largely expected except for the inclusion of corporate debt on the shopping list. This should at least put a floor under the Euro IG market. The details, however, have not been released so we don’t know what the total or country allocations might be. The ECB’s best policy has always been

The Eurozone economy has weakened in 2016 slipping into deflation with both manufacturing and services PMIs turning south in January and February. After disappointing the market in December 2015 with a mere 6 month extension of the existing QE the ECB will be expected to do more to spur demand and head off deflation. The