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2020/06/04 / Erste Group Research

Hope for liquidity with signaling effect

The Eurozone is in recession. Furthermore, inflation in the Euro area has declined to 0.1% y/y in May 2020, the lowest level in four years. On Thursday, the ECB will publish the GDP and inflation forecasts of its economic staff. We expect significant downward revisions. The ECB is likely to use this development as the justification for a further easing of monetary policy on occasion of the upcoming Council meeting on Thursday: The PEPP purchase program is expected to be increased and extended. This could provide more liquidity and have a calming effect on sentiment.

Even more liquidity should be provided by the EU reconstruction fund ‘Next Generation EU’ with EUR 750bn. Credit markets were in an optimistic mood in light of these initiatives. Spreads once again tightened across all asset classes last week.

Special topics of the week:

- Cover Pool Reporting 4Q 2019: Austria
- VIG: Market volatility affects Solvency II ratio

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General information

AuthorErste Group Research
Date2020/06/04
Languageen
Product nameCredit News
Topic in focusCredits/ Corporate bonds
Economy in focusAustria, Eurozone
Currency in focusEuro
Sector in focus-
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