Week ahead: little risk appetite ahead of the Greek elections
Apart from the continued talks around when Spain will make the official request for aid to its banks (see spanish-bailout-to-surface-this-weekend), the Greek elections are definitely the main thing to follow. The election is too close to call, and we will not receive any more polls ahead of the voting. An unfavourable outcome could push Greece out of the Euro zone, so the willingness to take aggressive risk positions ahead of the elections is likely to be very limited. That said, after the correction in German bond yields seen earlier this week, it is far from certain that we would see new yield lows next week.
Economic data will likely continue to come in on the weak side. The surprising rate cut from the People’s Bank of China earlier this week already implied that this weekend’s economic data package will be bad. We do not expect encouraging data from the US either, with the May retail sales report on Wednesday being the main thing to watch.
On the issuance front, upcoming auctions could put some pressure on US Treasuries. USD 32bn of 3-year notes will be sold on Tuesday, USD 21bn of 10-year notes on Wednesday and USD 13bn of 30-year bonds on Thursday. In the Euro zone, the main focus will be on Italian BTP auctions on Thursday, while the Netherlands and Austria will sell bonds tomorrow and Germany on Wednesday.
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KeywordsChina, Euro, European monetary union, Fixed income, France, Greece, Major economies, Spain, USA, USD
• Separatists in Donetsk plan for a local referendum • A summit in Geneva to discuss the crisis in Ukraine
Yields edged higher yesterday – long positions with potential today. Equities rebound, but more weakness likely ahead. Euro-zone core inflation back to record-lows. Italy taps retail investors for huge amounts again. Big US banks boosting their lending to companies – Euro-zone doing much worse. Philly Fed, jobless claims and LTRO repayment announcement. New French 2-year benchmark and US auctions ahead.
• It has been a bumpy ride for US rates in 2014. A two month rally started the year and recently the Fed has added substantial volatility with their somewhat wobbly way of commenting on future policy. • Further, the last NFP on April 4th was quite a disappointment. • In this note we look into the market perception (through futures and options) of all this, and in particular find indications towards a loss of faith (on rising rates) on behalf of the option market.
• Putin urges UN to condemn Ukraine’s intervention • Chinese growth at weakest level for six quarters
German 10-year yield finally broke important support – mood remains bullish. A correction higher in yields still looks likely today. US equities recover after early losses. Q1 effect hits Chinese GDP numbers again. Ukraine’s military starting to use force US core inflation bottomed out? Euro-zone inflation and US housing market data ahead – Germany to sell 10-year bonds.
China’s Q1 GDP growth of 7.4% was marginally higher than market consensus. It was caused by a combination of cyclical slowdown and structural shift away from the traditional growth drivers. Beijing is likely to continue the fine-tuning policies and stays away from large-scaled stimulus.
The latest Euro Rates Update is now available
• Obama warns Putin • Ukraine raises policy rate
Financial crisis and subsequent Euro crisis have cast doubts on the future prosperity of the Nordic countries. This report takes a closer look at the competitive position of the Nordics over past ten years and aims at answering how worried these countriesshould be.
Bond yields rebound, but bonds with more performance potential left. Intra-Euro-zone spreads narrow. Equities rise – more downside potential in the near term. US retail sales beat expectations. Eyes on US CPI and Yellen’s speech.
The Ukrainian President's deadline for rebels occupying state buildings in Eastern Ukraine to lay down their weapons have passed. Markets are awaiting news. EM FX is slightly weaker this morning, especially the RUB, the PLN and the TRY, but it seems that markets are becoming more resilient to headline news from Ukraine.
• Brighter outlook for global growth • Swedish finance minister worried about inflation
Bonds with more gains on Friday – German 10-year yield to break lower today. Finnish bonds feeling some pressure after a negative outlook by S&P. Correction lower in equities has further to run. ECB fights the stronger currency with words – and talks further about QE. LTRO payments continue coming in – ECB more concerned about the rising euro. US retail sales & inflation, Chinese GDP and corporate earnings ahead. New French 2-year benchmark out this week.
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• Finland – S&P affirms AAA but lowers outlook to negative • Nasdaq sees largest decline since November 2011
The credit rating agency Standard & Poor’s surprisingly changed its outlook for the AAA rating of Finland from stable to negative, the first major rating agency to do so. The action puts more pressure on the already shaky government and will deliver a hit to Finnish bonds, very dependent on the highest ratings.
Bonds with a big rally yesterday – curves bull-flatten. German 10-year yield gathering momentum to break lower – a correction higher in yields still likely today. Finnish credit rating starting to feel pressure – more pressure for the shaky government. Huge demand for the new Greek benchmark. US consumer confidence and IMF Spring meetings ahead. Italian auctions concluding a busy supply week.
Following this morning’s CPI figures, the Riksbank is widely expected to cut rates. But how can you trade SEK and Swedish Rates in this environment? Find out more on that, alongside updated views from our macroeconomists and strategists across the Nordic region. Northern Light gives you everything you need on Scandinavian Macro, FX and Fixed Income. Enjoy!
@HansMagnusBorge @KathrineAspaas Hvor lang ladetid er det på batteriene?
@EsaHakarauta Toivottavasti herätään vähän aikaisemmin.:) Suomen korot ovat ottaneet kyllä aika rauhassa vielä tilanteeseen nähden