Delay on QE announcement disappoints

A fixed income expert expressed disappointment at the lack of hard news on quantitative easing (QE) by the European Central Bank (ECB) and noted signs of a split among ECB board members over QE.

Following an early December ECB meeting, BlackRock deputy CIO of fundamental fixed income and head of the global bond team, Scott Thiel, said “ECB President Draghi appeared to rule out any QE announcement in January in favour of ‘early next year’.” Thiel said that it was significant that the ECB changed its wording on the expansion of its balance sheet from “expected” to “intended”, and that the decision to do this was not unanimous.

Thiel said the growing discrepancy between tightening and loosening policies at the leading central banks had the potential to increase volatility in fixed income markets. “We see potential for further volatility as liquidity issues arise once markets begin to focus on the large imbalances and crowding in certain sectors that formed during the protracted era of very loose monetary policy, and when the divergence of monetary policies does become more pronounced”, Thiel commented.