Positioning on ECB’s dovishness – BAML

By FXStreet FXStreet (Guatemala) – Analysts at Bank of America Merrill Lynch explained that we are roughly half way through the waiting period between the October and December ECB meetings.

Key Quotes:

“The October meeting surprised by not only signaling action for December, but for that action to include the possibility of a depo rate cut. Not surprisingly the market repriced the probability of a depo rate cut meaningfully.

We took advantage of that move to take off our 2y1y EONIA position, recommended tactical flatteners in 10y-30y Bunds and a long in 5y German cash, as well as continuing to recommend longs in EUR rates vs the US and longs in real yields. We revised our year- end Bund yield forecasts to 50bp, as we expected the combination of rate cut expectations and QE extensions to maintain yields around the lower end of the 50-75bp trading range that we have been discussing since May.”
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Source:: FX Street