DCSIMG

Week ahead to be dominated by uncertainty

Week ahead to be dominated by uncertainty

The dust has not yet settled after yesterday’s ECB press conference, where President Draghi dealt a blow to hopes that the central bank will quickly make huge bond purchases to address the Euro-area debt crisis. The fact that the ECB did not deliver concrete action but only tough words implies a lot of uncertainty about what to expect from the central bank’s potential interventions in terms of amount, timing and interest rate targets.

With no major data releases from the Euro area and the US this uncertainty is likely to dominate markets next week. Thus we expect to see significant volatility, potentially influenced by comments from policymakers, with no clear trends unless Draghi spells things out in more detail as early as next week.

Regarding economic data, releases from China will likely attract most attention. We expect generally positive surprises compared to consensus estimates next week, with more relatively good news to come in the autumn. Bank of England’s inflation report is released on Wednesday.

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 24bn of 10-year notes on Wednesday and USD 16bn of 30-year bonds on Thursday. In the Euro area, the main focus will be on the German EUR 4bn 10-year notes auction on Wednesday.

Please read more in our Global Week Ahead

Latest research

Germany: improving confidence old news – next week’s inflation numbers more important

A rise in the German Ifo index, together with yesterday’s PMI numbers and an estimate that Spanish GDP growth picked up clearly in Q1 are further signs that the Euro-zone economy is picking up momentum. However, it will be next week’s inflation numbers that are more crucial in determining ECB easing expectations and thus the near-term course for markets.

Swedish Morning Briefing - Thursday, April 24

• IMF expected to endorse 17 billion dollar loan to Ukraine • Riksbank minutes from April meeting due out at 9:30 today

FI Eye-Opener: Dovish Draghi to deliver more soft words

Bonds record some gains – yields to fall further today. Euro-zone PMIs continue to show resilience – US new home sales plunge. Spain to revise its borrowing needs down. European Commission confirms Greek primary surplus – further debt relief ahead? German Ifo and Draghi’s speech ahead. Plenty of bond auctions in store.

Euro Rates Update

The latest Euro Rates Update is now available

TRY: Regime change?

Despite a clear recovery in the Turkish lira, the situation in Turkey continues to be riddled with uncertainties and the potential for market-unfriendly surprises – especially in the political arena, where Prime Minister Erdogan may be fiddling with an overhaul of the political system.

Volatility Watch

Was that a pre-warning of QE or just loose talk? The latest ECB meeting managed to both disappoint (by delivering nothing) and excite (by laying the groundwork for something big) action seekers in the market. The truth is likely in the middle, and we expect no immediate easing from the ECB. We have seen a rebound, albeit modest, in gamma vols. Early vega options (1y-2y expiries) are moving down quite quickly Overall we still see the gamma segment as cheap, whereas we’re rich/neutral on vega.

SEK Rates: SGBi auction preview

The Swedish National Debt Office will sell 1 bn SGBi 3108 (1 Jun 2022) on the 24th April

Euro area PMIs: a good start into Q2

Higher PMIs in April, both in manufacturing and the service sector. Germany strong, France weaker.

SEK FI & FX Strategy - Market Views

A re-cap of market views...

Swedish Morning Briefing - Wednesday 23 April

• Kerry warns Russia to tone down its rhetoric • Chinese PMI looks set to rise

China: Not yet spring for the PMI

China’s flash PMI rose unsurprisingly to 48.3 in April. On the backdrop of favourable policies to small companies, the improvement is likely to continue in the coming months, but PMI is likely to stay below 50 because of excess capacity and debt overload.

FI Eye-Opener: China not rebounding like it used to

Bond markets with a rather calm day after Easter. Bonds with more potential in the near term. Intra-Euro-zone spread narrowing not run its course. Chinese PMI still depressed. Downside risks to today’s PMIs. Portuguese and US auctions ahead.

Preliminary Prepayments

Preliminary Prepayments

RUB: mixture of capital outflow, Central Bank’s policy and geopolitics

RUB has been under pressure recently as tsunami of capital outflow, caused by the threat of sanctions against Russia, washed away optimists and buyers of RUB-denominated assets. The pace of capital outflow increased in Q1 2014, reaching unimaginable $51 bn. (compared with $62.7 bn. in 2013). The volatility stays high on the Russian markets and the rouble remains focused on geopolitics.

Sweden: March Labour Force Survey better than it seems

Unemployment remained unchanged at 8.1% in March (seasonally adjusted). This was above forecasts at 8.0%. However, employment rose more than forecast and was up 0.3% m/m after an uptick of the same magnitude in February. Thus, the higher than expected unemployment reading in March is (once again) explained by unexpected strong growth in the labour supply, +0.3% m/m.

Swedish Morning Briefing - Tuesday 22 April

• Deal clinched during Geneva meeting • Ingves says deflation not likely

FI Eye-Opener: Portuguese bond auctions back

US Treasuries with a beating ahead of the Easter. Some gains ahead for bonds today. US existing home sales out today – Euro-zone flash PMIs later. A flood of auctions on the agenda already today. Portugal to resume its bond auctions. Fresh cash injection to boost French bonds this week.

Euro Rates Update

The latest Euro Rates Update is now available

Swedish Morning Briefing - Thursday 17 April

• Separatists in Donetsk plan for a local referendum • A summit in Geneva to discuss the crisis in Ukraine

FI Eye-Opener: Easter bunnies to boost bonds today

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.