Daily Market Color December 3, 2015ECB Announcement Disappoints as Investors Gear up for Friday Payrolls Equities are down sharply today, while Treasuries and swap rates are up more for the day than they have moved in over 9 months, after the European Central Bank’s expanded stimulus fell short of market expectations. The ECB cut its deposit rate by 10 bps pushing it further into negative territory, but left the benchmark rate and amount of monthly asset purchases (EUR 60 billion) unchanged. They also pushed out the maturity date of quantitative easing by 6 months, from September 2016 to March 2017 “or beyond”, and broadened the range of eligible assets to include local and regional government debt. Despite Draghi’s claim that the ECB is “willing and able” to act further if needed, the market reaction reeks of disappointment. The euro is up 3% versus the dollar, while Treasuries are selling off 10-15 bps in the long end in sympathy with its European sovereign counterparts. The Fed Chair Yellen testified today in front of Congress’ Joint Economic Committee, but largely reiterated comments she made yesterday. Yellen’s outlook on the US economy was upbeat and she indicated that she is ready to hike rates when the FOMC meets this month due to improving domestic data. In the Q & A that followed, Yellen said subsequent rates hike are “more likely to follow a gradual path” in light of weak growth overseas. Several Fed officials have maintained that they will continue to monitor incoming data right up to the December 15-16 meeting, but Yellen downplayed the weight of tomorrow’s payrolls report, which was largely considered the last remaining hurdle for liftoff. Yellen stated the Fed “can’t overweight any particular number”, which indicates the recent strength in data would likely be enough to overcome a disappointing November NFP. US economic data released this morning was largely in line with expectations. Initial jobless claims ticked up slightly to 269,000 (vs. 260,000 prior), but remained at a level consistent with a healthy labor market. The Markit US Services PMI came in at 56.1 vs. 56.5 expected.