Steady as he goes was the keyword for the ECB meeting today. All interest rates were left unchanged and the ECB did not announce any new liquidity operations.

Earlier today the Eurogroup announced that the total size of the Euro area’s firewall will be raised from EUR 500 bn to EUR 700 bn. This is a welcome move – which should have a positive effect on markets as well – if they can be bothered to care now that the ECB has doped everyone with the two 3-year LTRO’s.

Spanish yield spreads are rising ahead of the Spanish government’s presentation of a supplementary budget for 2012. We think the government can pull out of the crisis if the it keeps the momentum behind structural reforms and consolidation.

Fresh data from the ECB show that Italian and Spanish banks continued to purchase solid amounts of government securities in February. No doubt the ECB’s 3-year LTRO is the main reason behind this move – driving Italian and Spanish yields lower.

The decline in composite PMI was driven by a 1.3 index point fall in manufacturing PMI to 47.7 in March.

The ECB kept all interest rates unchanged at todays meeting. At the same time Draghi used the press conference to signal stable rates ahead, while further 3-year LTRO’s are off the table.

After the record breaking allotment of EUR 523 bn in the ECBs second 3-year Long Term Refinancing Operation, attention has once again turned to the build-up of Target 2 balances.

The scene is set for further “risk on” after the ECBs second 3-year Long Term Refinancing Operation (LTRO) resulted in allotments of EUR 529.5 bn.

Considering the macro risks hanging over the global economy, we argue that markets may be too complacent. We see four downside risks that could materialise this year, undermining global growth and eventually negatively affecting investor confidence and market valuations of risky assets.

Ahead of the ECBs next 3-year LTRO it is interesting to note that the first 3-year LTRO from December prompted Italian and Spanish banks to go on a bond purchasing spree in January.