- We do not see inflation expectations unanchoring
- Sees no specific spread target for ECB crisis tool
- A new tool is needed to make monetary policy work
Some members of the ECB had floated a spread of 150 basis points as usual between German and Italian yields. Currently, the Italian 10s are at 3.56% while the German Bunds are at 1.46%.
The risk for a new ECB program is to go against the laws of monetary financing. I’m also worried that they’ll end up bringing a knife to a shootout.