Man GLG's Jon Mawby reacts to European Central Bank's quantitative easing announcement…
Market participants have taken the ECB’s EUR60bn per month programme positively given that there is partial loss-sharingand that more importantly it will continue until it sees a "sustained adjustment in the path of inflation which is consistent with our aim of achieving inflation rates below, but close to, two per cent.
This means the program is potentially open ended in nature and given that asset purchases have been guided in the 2-30 year maturity spectrum, it should be supportive of peripheral government yields in the medium term. However for the recovery to be sustained we will need to see continued structural reforms. In the short term there remains a key tail risk from the Greek elections over the weekend, particularly in light of the ECB’s inability to buy Greek debt until the SMP rolls off in July.
