Ok, so as noted on Sunday, Mario Draghi is probably going to thread the needle today. Here’s what we said:

This telegraphing was itself telegraphed (remember: there’s now forward guidance for the forward guidance – that’s how absurd things have gotten) earlier this month when Bloomberg reported that the ECB is set to cut QE in half starting in January while extending the program for at least 9 more months. As we put it, “the ECB is going to cut QE in half, but you and Draghi can still ‘Netflix and chill’ for another nine months.” Good luck scrubbing that from your mind.

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If you’re looking for market turmoil around this announcement you’ll probably be disappointed. Draghi will thread the needle. He always does. Sure, the program itself is absurd and CSPP has created all manner of ridiculous distortions (see € HY for example), but once you accept that the whole thing is ludicrous on its face, Draghi has become a master of getting the messaging “right.” Maybe this time is different, but we doubt it. Over the longer-term, there are obviously questions as to what the taper will mean in terms of putting more of the onus on the market when it comes to filling the gap left by the taper, but that’s more an existential question about what happens in the post-QE era. Actually testing Draghi while the program is still in place is a dangerous game to play.

Who knows, that could end up being entirely wrong, bund yields could spike, and chaos could ensure, but we doubt it and besides, it wouldn’t be the first time we’ve been wrong this year, so fuck it.

But the overarching point is that between the market already knowing what to expect and with asset purchases to continue albeit at a reduced paced, it’s difficult to see this creating much in the way of near-term volatility.

Of course as we never tire of reminding you, this is always just a race against the clock: can you normalize in time to replenish the ammo ahead of the next downturn? That is, with the post-crisis policy response having clearly created the conditions for yet another  bust (remember, untethered systems create rolling boom-bust cycles), it’s all about how much counter-cyclical breathing room can be restored via normalization prior to things turning south again.