Markets
ECB Chief Economist Lane raised the idea of expanding the supply of euro assets in a keynote speech today, which is one of our long-term views. He believes that the presence of a safe reference asset that serves as a basis for asset pricing is an essential element of any independent monetary system. Such an asset should be highly liquid and its relative value should rise during periods of stress. The current financial structure of the European Monetary Union lacks such safe assets, given the small size of German bonds compared to the size of the eurozone or the global financial system. Lin says common bonds backed by the common financial capacity of EU member states are able to provide safe asset services, but the existing stock of such bonds is currently very small even as it has risen from around €80 billion outstanding before the Covid pandemic to more than €700 billion currently. There is enough scope to expand this financing further, with Mario Draghi’s 2024 EU Competitiveness Report estimating the annual need for cross-border financing at €750 billion. This includes Europe-wide public goods, but common policy imperatives such as urgent financing for Ukraine also justify joint borrowing. Lin also raises other options, such as the recently proposed “blue bonds/red bonds” reform. Under this approach, each member state protects an allocated source of revenue (a certain amount of indirect tax revenue, for example) which can be used to service commonly issued bonds. In return, the proceeds from the blue bond issue will be deployed to purchase a certain amount of national bonds for each participating member state. This would result in a larger stock of common bonds (blue bonds) and a smaller stock of national bonds (red bonds). Another proposal envisions financial intermediaries (whether public or private) being able to assemble a portfolio of national bonds and issue the securities in tranches, with the top tranche constituting a highly safe asset.
Turning to today’s market movements, the stalemate continues after US President Trump announced an extension of the ceasefire last week. Talks are believed to be possible on Friday. Visibility is very low although Iran describes the US naval blockade as a bombing and thus a violation of the ceasefire. Brent crude oil is back above $100 per barrel as major roulette action continues with EUR/USD moving away from the 1.18 resistance level. Equity markets are treading water with underlying bond yield curves marginally stable.
News and opinions
Belgian consumer confidence fell for the third month in a row in April. At -9 (from -6), it reached the lowest level since April 2025. On a macro level, unemployment fears are increasing with the unemployment sub-index rising from -3 to 6. On a personal level; Households have become more negative about their ability to save (18 out of 22) and about their overall financial situation (-5 out of -3), with both sub-indices also reaching their lowest levels since April last year. The outlook for the overall economic situation in Belgium has improved slightly compared to last month (sub-index at -43 from -45) although sentiment remains pessimistic from a broader perspective (for example, it was -25 in February before the conflict in the Middle East started).
• The Central Bank of Turkey (CBRT) kept the interest rate unchanged at 37.5%. The Turkish Central Bank also kept overnight borrowing and lending interest rates unchanged at 35.5% and 40%, respectively. Since the central bank has not recently held one-week repo auctions, the overnight interest rate has gained importance in determining money market rates. This was the second month in a row that the CBRT kept its policy stable after easing the interest rate from 46% to 37% during the period from July 2025 to January 2026. Turkish inflation rate fell to 1.94% on a monthly basis and 30.87% on a yearly basis in March to be compared with the level of 42.1% at the beginning of 2025. The Central Bank of Turkey estimates that although the underlying trend of inflation is still falling in March, The main indicators point to a slight increase in the basic trend in April. Geopolitical developments and resulting uncertainties drive up energy prices and are a source of volatility. Even as recent indicators point to a slowdown in activity, the Central Bank notes that the potential second-round effects of recent developments on inflation expectations will be significant and that the Committee remains highly attentive to upside inflation risks. The Turkish lira’s reaction to the interest rate decision was limited. At 52.7 EUR/TL; The Turkish currency is still trading near the historic lows it reached during the previous week.
