Although the consensus regarding demand for the first TLTRO has tended to sag in recent trading sessions, the disappointment was great. Whereas demand was expected to reach between EUR 100bn and EUR 150bn, the European Central Bank (ECB) will in fact allot only EUR 86.2bn on 24 September.

Events over the week proved once more that one-way-bets do not exist in global financial markets. Not many investors felt that it was still possible for the ECB to surprise on the upside after Mario Draghi's comments at last months' Jackson Hole Symposium.

According to Schroders Azad Zangana, European Economist and Chris Ames, Senior Fixed Income Portfolio Manager, the cut in interest rates is totally irrelevant. Due to the glut of liquidity in money markets, short-term interest rates have been below the ECB's main financing rate for some time – meaning that the latest cut will have near zero impact.

US equity and bond markets have performed in-line over the past few weeks. As a result, the correlation between 10-year rates and the S&P 500, which had turned positive since the announcement of Fed tapering (steepening rates and stronger equity markets), is now weakening once again.

Despite increased optimism at the start of the year, growth forecasts for the US economy are once again falling towards the 2% trend pace of recent years. The faster-than-anticipated fall in unemployment appears to betray a fall in the economy's potential rate of growth...