Tue. Apr 23rd, 2019

Lower interest rates and higher demand

Lower interest rates and higher demand


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The Treasury has placed 1,272 million euros on short-term debt, where 305 million euros have been allocated to 3-month bills at -0.425%, and 967 million at a rate of 3.61%. In both issues, interest rates have been reduced compared to the last auction. The demand is still very strong, and in today's issue it has been five times greater than the capital placed.

During the last weeks, risk assets have enjoyed a strong upturn motivated by the progress of trade negotiations between the US and China. This situation has helped to reduce the risk premium, which returns to trading below 110 basis points. During the coming weeks, growth data for the first quarter of the year, as well as the publication of business results, will be decisive in maintaining the current climate of confidence with investors.

This week the ECB will meet, and no changes are expected in its monetary policy. During the last meeting, he announced a new injection of liquidity to the bank to try to keep bank liquidity stable. This meeting could turn negative deposit rates, after Mario Draghi affirmed his intention to modify them several weeks ago.

Inflation has reached minimums of the last 12 months, at 1.4%, which guarantees that interest rates will not rise until the main price indicator returns to rebound towards the ECB's target area of ​​close to 2%. The first forecasts for rate increases are set for June 2020, and all this if the current economic slowdown does not intensify.

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