• The likelihood of a deposit rate cut at the upcoming ECB meeting is close to nil and the chance that the ECB will move to negative rates at a later stage is very small.
• The ECB might present an ABS purchasing programme, but we doubt that they are ready to give details yet and if announced the programme might underwhelm.
• The most likely outcome is that Mario Draghi will deliver nothing but soft wording. If he wants to add further stimulus, a refinancing rate cut is the most plausible option.
• The EONIA curve has steepened considerably and EUR swap rates have moved higher during May. We prefer fading the move going in to the ECB meeting.
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Danske Bank