ECB Struck A Balanced Tone

Key Points


ECB meeting hinted a reduction in PEPP purchase with a balanced tone,Lagarde reinforced that it’s too early to discuss the end of the program;inflation outlook has been lifted

Spreads reacted optimistically following the meeting, capital structure risks outperformed this week; Corporate Hybrids lagging the rest of the capital structure risks YTD given higher than expected supply, relativevalue and vol adjusted carry remains attractive

Low vol regime persists though demand for downside protection picked up; exogenous risks around China’s grip on the tech sector and the US fiscal bill are likely to weigh on higher beta assets; we remain neutral on beta positioning

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