• Overly-gradual monetary shift would compromise ECB credibility
  • Overly-rapid shift would jeopardise financial stability
  • I think normalization can continue to be gradual, it can mean 25 or 50 bps
  • After Sept, will continue to hike in gradual but sustained way
  • A spread of 150 bps would be justified
  • A spread of 200 bps would be unjustified

I don't think this tells us much about what's coming. But 50 bps is certainly on the table. For the euro, the more-important thing will be the anti-fragmentation tool. Italian 10-year yields are up 3 bps today compared to bunds up 14 bps. The spread is 212 bps currently.

The ECB deciding exactly what the proper spread should be is disquieting.

EUR /USD is down 10 pips to 1.0435 today.