MyStratWeekly – April 11th 2023

Topic of the week: Greening of the ECB’s balance sheet

• As part of its mandate, the ECB integrates climatic conditions into the conduct of its monetary policy;
• Since October, it has redirected its purchases of corporate bonds towards issuers with better climate performance;
• To be in line with the objectives of the Paris agreement, the ECB must accelerate the pace of greening its portfolio while its room for maneuver is reduced with the QT;
• It will have to expand and strengthen its action to other assets such as ABS, covered bonds, the collateral system and sovereign bonds;
• This will benefit less polluting issuers and green bonds, particularly those of supranationals and agencies.

Market review: Desire vs. reality

• The equilibrium of the financial markets requires rate cuts;
• Bunds ignore pickup in service activity, high inflation;
• US job market cools at the margin;
• Swap spreads still elevated despite lower volatility.

Stéphane Déo's and Aline Goupil-Raguénès' podcast

• Back to the NFPs, public deficits rise again, world trade is struggling;
• Greening the ECB’s balance sheet.

Chart of the week

Gold prices have passed the $2,000 threshold which reflects a variety of risks.

Bond market volatility has fostered flows into alternative safe havens. Risk aversion is always a support for gold. Inflation is still elevated given sticky core measures, which historically fans demand for gold.

A weaker dollar also played a role in the run-up in gold prices.