DAVY VIEW

The ECB surprised markets yesterday (July 21st) with a 0.5% hike in its key interest rates, versus the consensus for a 0.25% rise, despite being flagged to the media earlier this week as a quid-pro-quo for the new Transmission Protection Instrument (TPI). The ECB’s statement said further hikes will be appropriate at upcoming meetings but was otherwise vague on the likely pace of rate normalisation. Bond markets seemed unimpressed with the new TPI tool, with Italian 10-year yields pushing through 3.6%.