Jan von Gerich
Jan von Gerich is the Global Fixed Income Strategist for Nordea, and has been an expert on government bonds from before the global financial crisis. His analyses start from the big picture, as understanding the wider context is essential in current times, and then proceed to more market-oriented views.
Some of the biggest investors in the world subscribe to his analyses.
Jan graduated from the Helsinki University of Technology with a Master of Science and has been with Nordea since 2004, working in the Helsinki, Copenhagen and Stockholm offices. Previous to Nordea he has worked in New York within the financial industry.
Good morning, Bonds take a beating as expectations of an early Fed move increase German 10-year yield rising to 1.5-month highs Equity markets losing momentum ADP – promises, promises Spain to remain in investment grade category US budget deal inching …
Macro and Events in Brief Eurozone core inflation climbed to 1,0 % y/y in November figures showed last week. This week ECB again announce its interest rate decision (Thu) and we expect no change in key rates. Risks are clearly …
Good morning, Bond yields end with limited changes on Friday Near-term course for US yields still higher China’s manufacturing sector gradually gaining momentum Ratings agencies continue to lag markets Euro-zone inflation numbers some consolation to the ECB Crucial week ahead …
Macro and Events in Brief Last week’s flash composite PMI from the Eurozone came out at 51,5, down from 52,0 in October and lower than the consensus estimate. The index shows big regional differences, with France pulling in the negative …
The looming asset quality review by the ECB, year-end effects and the search for liquidity, an economy losing momentum and the big narrowing in spreads seen lately all favour taking profit before the end of the year. Intra-Euro-zone spreads are set to widen in the weeks to come, while banks will feel pressure vs other sectors.
Good morning, US yields edge back lower – German ones fall from intraday highs but still end the day higher Bonds to see further modest performance today Intra-Euro-zone spreads narrow on hopes for more action from the ECB Euro-zone economy …
To QE or not to QE, the question for the Fed, and soon maybe the ECB. In this month´s European FI Strategy we will digg into this topic and the recent developments in the Scandie rate markets.
Good morning, US bonds take a big hit and the curve steepens Bonds to perform today, after a negative open in Europe China’s PMI disappoints Fed minutes and Bullard’s comments poison for bonds Negative rates coming soon to the Euro …
Good morning, Bond yields rise and upward pressure set to continue today Italian bonds perform on the back of positive data Bernanke emphasizes low rates for long – Constâncio joins those mentioning QE China’s currency interventions coming to an end …
Good morning, Bond yields fall and curves flatten Long US yields continue to experience upward pressure in the near term S&P 500 retreats from record highs Fed’s Dudley sees improvements but stimulus still needed German ZEW and more central bank …
Macro and Events in Brief Last week was fairly quiet on macro news. Norwegian core inflation rose to 1,9 %, but is still below Norges Bank’s forecast. Bank of England released their Inflation report, and according to the new forecast …
• Norway: We expect Norges Bank to cut rates by two times 25bp next summer. There will however not be any such signals at the upcoming MPC meeting in December. Still, we believe the recent weakening of the NOK is …
Bond yields edge higher on Friday – short term course for yields upwards. S&P 500 hits records again – Asian equities rally overnight. QE à la ECB in the pipeline? Commission issues warnings to Spain, Italy and Finland. Euro-zone PMIs and Euro-zone inflation numbers ahead. A lot of central banker speeches and the NAHB index in today’s calendar. Spanish and French auctions this week.
Good morning, Bond rally continues, but yields set to edge higher today S&P ends yesterday at new records – equity rally extends into Asia Ireland confident it does not need a safety net – more demands on Greece Another recession …
Good morning, Bond yields headed higher yesterday while curves steepened Yields to edge lower today, while in general yields to see upside pressure in the weeks ahead China offers few details of its planned reforms Dovish Fed comments not supportive …
In the aftermath of the strong US payrolls report, the 10Y yield is heading for 3% again, driving also EUR yields higher and leading to steeper curves. We are unlikely to go higher than 3% for now, though the risk of a short-lived bigger sell-off is real. Fed tapering is looming, although not yet in December.
Good morning, German bond yields edge lower in low-volume trading – higher yields ahead today US 10-year yield to approach 3% again – curve with more steepening potential Focus on central banker speeches US and Dutch auctions ahead German bond …
Macro and Events in Brief ECB surprised the markets last week by cutting its refi-rate by 25bp to 0,25%. In the statement Draghi kept the downward bias, claiming that interest rates will “remain at present or lower levels for an …
US Treasuries hammered after strong payrolls data. German bonds give away all their ECB-induced gains – yields to edge slightly lower today amidst low volumes. French spreads move only little after a downgrade. Portuguese outlook changed to stable December tapering back on? Divisions within the ECB a source of greater worries? Euro-zone GDP and Bernanke’s speech ahead Plenty of auctions ahead.
German bonds with a big rally – spreads narrow. Equities take a beating. China’s improving trade data not able to lift sentiment this morning. ECB acts sooner than expected for once – bonds may still run out of steam in the near future. Prepare for positive payrolls – bonds to suffer.
US yields fall – German yields with little changes. Italian and Spanish bonds continue to face pressure. Yields set to rise today and curves steepen. Italy launches a bond in record size – funding outlook quite positive. ECB to find it difficult to meet high expectations – widening pressure for spreads. Spanish and Italian supply ahead.
Bonds take a beating – a correction lower in yields ahead today. Euro-zone outlook deteriorating again – What will the ECB do? Strong services PMIs from the US and the UK. German factory orders and Euro-zone retail sales ahead. BTP Italia finding very strong demand again – Germany to sell bonds today.
Good morning, Bond yields edge lower in calm trading conditions Intra-Euro-zone spreads widen Yields to move slightly higher today Fed December tapering not excluded but not likely either Non-manufacturing ISM index, EC forecasts and Draghi’s speech ahead Austrian auctions and …
Macro and Events in Brief The Fed did not mention the recent fiscal turmoil in Washington at its monetary policy meeting last week, thus striking a slightly less dovish tone than expected by the market. We stick to our forecast …
Good morning, US Treasury yields jump – more upside today Intra-Euro-zone spreads continue to narrow US manufacturing confidence holding up well Spain’s progress starting to be acknowledged by the rating agencies LTRO repayments jump – overnight rates remain largely unaffected …
German bonds rally as ECB expected to do more – profit taking in bonds ahead today. Intra-Euro-zone spreads narrow. US yields rise on the back of positive data. China’s manufacturing PMI hits 1.5-year highs. Plunging inflation causing discomfort at the ECB. ISM still defying gravity?
Good morning, German 10-year yield falls below 1.70% – US yields jump in the aftermath of the Fed Spanish and Italian bonds face more losses ahead Equity markets disappointed by the Fed’s message Fed refuses to rule out an early …
Bond yields fall ahead of the Fed – US equities continue to break records. Spanish and Italian bonds rally, helped by fresh cash injections. US budget negotiations can also yield some results. Fed’s message to send bond yields higher today? Plenty of action on the auction front.
Good morning, More signs of weakening bond market momentum in the US Spanish bonds rally on the back of coupon and redemption reinvestments Higher rates damping US housing market activity EU moving towards pushing structural reform implementation harder US retail …
Finnish bonds continue to be supported by their strong credit status. The Finnish banking sector is healthy, something that will gather added attention due to the ECB’s comprehensive assessment on banks. Especially switches out of shorter Austrian, German and Finnish bonds into the 5-year auction bond look attractive.
Good morning, Core bonds still gain on Friday, but momentum waning Italian yields jump Equities had a positive start to the week Euro-zone credit impulse continues to show positive development US consumer confidence under pressure Eyes on the Fed again …
Market talk Recent market action has once again illustrated that the rise in interest rates that we have seen since early May took place too fast… EUR strategy Excess liquidity below EUR 200bn and a steady repayment pace has made …
Good morning, German 10-year yield fails to break September lows – some profit taking ahead today Asian equities under pressure overnight Tighter monetary policy continuing to worry in China Euro-zone PMIs losing momentum Falling excess liquidity putting upward pressure on …
Bonds continue to gain, while curves flatten further. Spanish bonds rally, while Italian ones feel pressure. Equities finally with some profit taking. China’s economy picking up momentum again. ECB’s upcoming bank assessment limiting risk appetite. PMIs grabbing attention today. Another EU summit – no breakthroughs expected.
Good morning, Bonds with a big rally as US payrolls disappoint Equities helped by the prospects of more easy monetary policy Strengthening euro hurting the recovery prospect of the Euro zone Weak payrolls to push Fed tapering expectations further into …
Bond yields edge slightly higher ahead of today’s payrolls. Double-digit price gains seen again in many housing markets. Higher prices and increased mortgage rates braking US housing markets. Long awaited payrolls ahead – be long bonds.
Good morning, Bonds continue to find demand – yields with more downside potential S&P 500 continues to surge higher ECB worried over bank resolution US payrolls and Euro-zone PMIs ahead Not much action ahead in terms of bond auctions Cash …
Treasury yields continue to fall – a rebound ahead today. S&P 500 reaches new records. Chinese economy rebounds – outlook still not all positive. Fed will have to wait for more data for a while longer. Rather light calendar – September payrolls out next Tuesday.
As has been seen in US politics often in the past few years, Congress came together to raise the debt ceiling at the last minute. However, the damage has been done, political wrangling will continue, and the Fed is likely to delay its tapering plans. The US curve is set to flatten further, while the USD will likely see renewed pressure before long.
Treasuries rally on a debt ceiling agreement – so do equities. Bonds with more potential – equities may see profit taking. Familiar pattern repeated: last-minute deal in Congress. Costs to the economy may be end up limited, but confidence taken a hit. More weak confidence data ahead from the US. Spain and France to sell bonds.
Bond yields head higher despite late equity weakness in the US. Bonds likely to find support again today. Bank bailouts continue to divide opinions in Europe. House throws the ball back to the Senate. Bad politics starting to hit confidence. The Fed’s Beige Book and NAHB housing market index ahead. German 2-year auction and more US bills.
US Treasury yields rise overnight as an agreement in US politics seemingly within reach again. Senate closes in on an agreement – House remains suspicious. US politics to cause a hit to confidence? More US T-bill auctions on the agenda. Pace of corporate earnings reports picking up.
Bond yields with little changes – some support for bonds ahead today. Italian and Spanish bonds rally. Ireland confirms its plans to exit its bailout programme. US political negotiations not close to the finish line yet. US consumer confidence feeling only modest pressure. Chinese GDP and US confidence data in focus. German, Spanish and French auctions ahead.
Here is an overview of our financial forecasts. Read the full report in the attachment or the headlines for a summary.
Long US yields rise and the curve steepens – these moves likely to continue today. Equities show signs of a recovery. An increase in the debt ceiling a step closer. The Fed’s decision not to taper in September a close call. Investors endorse all the progress made in Spain. Italy launches a new 7-year bond with good demand. Bank of England, jobless claims and Lew’s testimony.
Spain found close to EUR 11bn of interest for its new 30-year benchmark, a strong signal of how receptive the European bond market is and a testament of all the progress Spain has already made in reforming its economy. As long as the government has the patience to stay on the reform path, the outlook for Spain can improve further, and Spanish bond yields to fall.
US curve continues to flatten, as short yields rise. Equities taking another beating. Spanish and Italian bond yields rise, as more issuance in the pipeline. Increased market pressure adding to chances of an agreement on the debt ceiling. Dovish line to continue at the Fed – Yellen picked to succeed Bernanke. Small business confidence suffering only mildly in the US.
Bond yields fall – bonds should remain supported. Greece sees a return to growth next year. Industrial data ahead in Europe. US pays a higher price for T-bills – more auctions today.
Bond yields rise on Friday – bonds should find support again today. No quick end seen in US political deadlock. Eagerness for reforms in Japan already waning? Banks continue to repay the ECB – excess liquidity approaching EUR 200bn. Uncertain data calendar ahead. US set to sell a lot of debt despite the looming debt ceiling.
Good morning, US Treasury yields fall amidst mixed data – equities still under pressure Downward pressure on bond yields and equities set to continue in the near term US default to cause another Lehman-style crisis? Jobless claims point to an …
Good morning! German bonds end with gains yesterday. Bonds to perform today due to Syrian uncertainty ahead of the weekend. Support for military intervention in Syria receding – US ready to act alone. US GDP with a notable upward revision. Portuguese reforms with another setback. Soft inflation data from Germany. A lot on the calendar ahead of the weekend.
Good morning! Core bond yields rebound – Syria continues to cause uncertainty. Selling pressure easing on the equity markets. US pending home sales retreat – mortgage rates continue to increase. Pressure on Italian government easing – risks remain. More gloomy credit data from the Euro zone. BoE’s Carney not too worried about the recent market moves.
The sell-off that started in the US has been supported by positive macro developments in other parts of the world. Still, central banks are likely to retain a dovish stance, while it will be increasingly difficult to meet the constantly rising expectations. More on this and other fixed income topics from EUR, USD and Nordic rate markets.
Good morning! Core bonds with sizable rallies, as Syrian conflict boosts flight-to-quality. Equities taking big losses – crude oil prices surge higher. Syria capturing most headlines – markets pricing in most risks beforehand. German confidence continues to improve. US pending home sales and Euro-zone credit data ahead. Finland with a new 5-year benchmark.
Finnish economy has not had it particularly easy lately, and there is no denying the fact that also Finland is in dire need of structural reforms to tackle the challenges ahead. That said, Finland remains well-positioned relative to most other Euro-zone economies and still has good prerequisites to reform the economy.
Good morning, Bonds rally on the back of weak US data – European trading volumes very low Equities mostly under pressure Political uncertainty burdening Italian assets again US durable goods orders disappoint Geopolitical risks to receive more attention going forward …
Good morning! German bonds could not replicate the rally in the US. Equities helped by a fall in yields in the US. Hiccups in US housing market recovery to delay Fed tapering? More conflicting signals from ECB members. Euro-zone credit & confidence and US price data ahead. US, Italian and Belgian auctions in store.
Good morning! Bonds continue under pressure – some profit taking in store ahead of the weekend? Equities helped by positive data. Spanish bonds better placed to benefit from improving sentiment compared to Italian ones. Euro-zone confidence data continue to improve. ECB’s Nowotny sees no need for further rate cuts. US new home sales and Euro-zone consumer confidence ahead.
Good morning! Bonds continue to take losses – US 10-year yield rises to new 2-year highs. Equities still under pressure. Fed continues to monitor data closely to determine its tapering plans. China’s PMI another sign of stabilizing growth. PMIs to maintain positive momentum? Jackson Hole almost a black hole of new signals this time?
Central banks have become very keen to give concrete forward guidance to markets lately. The Fed has of course been doing it for several years already, but the ECB and the Bank of England started doing it only recently. The …
Good morning! Core bonds finally with a rebound – Fed minutes could provide more support. Intra-Euro-zone spreads widen European equities continue to feel pressure, but S&P 500 with a small recovery. German election campaign turns to Greece. Reading minutes can actually be exciting. Germany the highlight in a quiet supply week.
Good morning! Core bonds fail to post a rebound. Equity markets continue to feel pressure on a broad front. Emerging market currencies taking a beating. Spanish bad loans not peaked yet. Lack of fresh drivers continuing.
Good morning! Core bond yields move mostly sideway – Italian and Spanish bonds rally. German and US yields established new trading ranges at higher levels. Yesterday a positive day on the equity markets. China’s economy finally found support? Italian economy minister promises reforms – promises easier than implementation. Spanish industrial production stabilized. Not much in the calendar ahead of the weekend.
As Northern Europe slowly returns to work after the holiday, in this short note we try to summarize our current stance on the global economic cycle and financial markets.
Good morning! Bond yields fall, while equities feel pressure. Chinese data starting to pick up? BoE links its policy to the unemployment rate. More strong data from Germany. Calm in terms of economic data – US to sell 30-year bonds.
The Bank of England followed in the footsteps of the Fed today, as it linked its future monetary policy to the development of the unemployment rate. The Bank’s own forecasts imply the Bank rate will remain at its current levels for at least until mid-2016, while the clarified stance risks an increase in longer-term inflation expectations.
History is no guarantee of how the future will play out, but it usually acts as a valuable guide. As people in many parts of Europe and the US head to the beach, it is useful to take a look, how financial markets have been behaving in the past. It turns out August has actually been a very good month for bonds.
Good morning! Core bond yields edge further up – equities feeling pressure. More supportive voices for September tapering. ECB’s Praet seeks to clarify forward guidance. More positive data from Europe. Forward guidance Carney style. US and German auctions ahead.
Good morning! Core bond yields rise as data impress. Equity prices fail to gain further. UK composite PMI hits new highs – how much need for more stimulus is there? More positive signals from the US economy. Euro-zone retail sales showing some life. European industrial data on the agenda. Austrian and US issuance ahead.
Good morning! US Treasuries with a huge rally post-payrolls. Technical picture still not particularly flattering for bonds. S&P 500 reaches new record highs again. US employment report disappointing, but not without a mixed message. Berlusconi verdict no blow for Italian bonds. LTRO repayments continuing at a rather steady but slow pace. More specific forward guidance from BoE this week. Issuance activity subsiding.
Good morning! Treasuries with a big sell-off – payrolls with the potential to reverse that. Equities with big gains and the positive momentum likely to continue. ECB retains an easing bias. ISM surges higher. Berlusconi convicted – ban on politics not confirmed. The stability in payrolls numbers cannot continue.
Good morning! Treasuries rally in the aftermath of the Fed – potential for more gains. Asian equities boosted further by the official Chinese PMI. No new signals on tapering from the Fed. IMF warns on the Greek funding gap. Strong ADP report from the US – GDP growth picking up. Please guide us.
Good morning! Bond yields with limited changes, but all that is about to change. Italian bonds with some performance despite the on-going Berlusconi court case. Asian equities mixed overnight. Watch out for the weak Dutch economy. Brace yourself – it all starts with the US GDP and the Fed today.
Good morning! German bond yields with little changes – US Treasury yields with some upward pressure. Japanese equities finally with a rebound. US borrowing needs keep falling. Time of reckoning for Mr Berlusconi? Economic data releases picking up. Italy to launch a new 10-year benchmark.
Good morning! Core bond yields edged lower – more modest support likely today. Japanese equities feeling the heat in earnest again. The calendar looking overwhelming: US GDP, ISM & payrolls, Fed, ECB & BoE… Italy awaiting the Supreme Court decision on Berlusconi. Belgium, Italy, Germany and Spain to sell bonds.
Good morning! German bond yields continue to rise – Asian equities under pressure. Weak credit growth numbers from the Euro zone – Ifo fails to impress. Looking beyond Bernanke. UK economy finally taking off? Spanish unemployment rate retreating at last. Consumer confidence numbers in a light calendar.
Good morning! Core bonds take a beating on weak data – the pressure set to continue in the near term. Equities under pressure in the US and Asia overnight. Yes, also good news can come from the Euro zone. Ray of light in the ECB’s lending survey. China starts to stimulate again – but in a limited scale.
Today’s Euro-zone PMI data and the ECB lending survey provided fresh evidence the area is making good progress in finally defeating recession. The data is bad news for bonds in the short term, but any move higher in rates should be seen as a buying opportunity rather than the start of a more permanent uptrend in yields.
Good morning, Bond yields rise – equities see modest pressure More worrying data from China – stimulus measures now closer? Spanish GDP contraction continues to moderate Modestly hopeful news from France Euro-zone PMIs and ECB’s lending survey important 5-year auction …
The Fed is finally starting to get its message through: tapering does not mean imminent policy tightening. Markets are not that allergic to all tapering talk anymore, while economic data will receive added attention going forward. In the Euro zone, political risks are on the increase again.
Good morning! Core bond yields little changed in subdued trading. Bonds from southern European countries rally. US equities reach new highs again. The drop in US home sales not looking particularly worrying yet. Light economic data ahead of a heavier load tomorrow.
Here is an overview of our financial forecasts. Read the full report in the attachment or the bullets for a summary.
Good morning! US Treasury yields break their 3-month uptrend. Japanese elections behind – now for the real reforms. No national salvation pact in Portugal. China moves forward in its financial reform. Euro-zone confidence data eagerly awaited. The Netherlands, Italy and the US to sell bonds – redemptions continuing.
Good morning! US Treasuries hurt by positive data and new record-highs for equities. Core bonds likely to be supported today. ECB eases collateral requirements – and then tightens some. Ireland continues to prepare for full market comeback. Detroit files for bankruptcy. Upcoming events adding to uncertainty ahead of the weekend. G20 meeting and Japanese upper house elections ahead Eyes on Italian and Portuguese politics
The Netherlands is going through a painful balance sheet recession and the outlook remains cloudy. Fiscal policy is tight up to now. While we consider a complete policy u-turn unlikely, we do expect the Dutch government to move towards somewhat less …
Good morning! US Treasuries rally on Bernanke’s repeated message. Bernanke’s dovish line without new big signals sufficient to boost bonds. Details of US housing market data better than suggested by the headline. Italian government not having an easy ride. Commission plays down reports of the big Greek financing gap.
Good morning! Core bond yields edge lower ahead of Bernanke – equities under modest pressure. Fresh inflation data not easing the disinflation concerns of some Fed members. Strong momentum continues on the US housing market. EU planning to kick the IMF out of Europe? Bond bulls likely to be disappointed by Bernanke’s message. BoE minutes and US housing market data also followed.
Good morning, German and US yields move in opposite directions. Spain’s Rajoy continues to feel the heat. US retail sales disappoint. EFSF loses its last triple-A rating. Plenty of inflation data in the calendar.
Good morning, German bonds rally – US Treasuries see profit taking US equities continue to advance Portuguese bonds with a sell-off Chinese growth slows, but not more than expected S&P sees a positive outlook for Ireland – Fitch downgrades France …
Political risks have clearly risen in several Euro-zone countries, materially raising the odds that in at least one country, the risks materialize. Bond markets should become more susceptible to such risks in the near future, warranting cautiousness towards the bonds of the weaker Euro-zone countries over the summer.
Good morning, Core bonds rally on Bernanke – Spanish and Italian bonds under pressure US equities close at new highs Political crisis in Portugal continues ECB policy-makers play down the significance of the central bank’s forward guidance The recent jump …
Good morning, Bonds rally after Bernanke’s reassuring comments Fed minutes leave the door open for tapering later this year Bernanke reassures accommodation will continue Sell-off pressure for bonds likely to ease for now Messy politics continuing in Italy New 7-year …
Good morning, Especially German bonds with good performance – more support likely early today Terrible Chinese trade data point to clear weakness Italy downgraded – pay more attention to Spain The definition of an extended period a very sensitive topic …
Good morning, US Treasuries pare some of their losses from late last week Equities with a positive day in general Spain planning to launch a new 15-year bond today Greece set to receive further bailout instalments for now German industrial …
Here is a overview of our financial forecasts. We have made minor changes to the US rates and the commodities forecasts, and we summarize last week's FX forecast changes.
Inflation is quickly becoming a topic again – not because of concerns the huge stimulus measures pursued by central banks would be creating inflation, but because the falling inflation rates are raising questions of whether central banks are doing enough. Bonds should thrive in an environment of falling inflation.
The recent sell-off in rates is likely to be reversed, which will increase the search for pick-up again. Such behavior would benefit Finnish bonds as well, making Tuesday’s Finnish bond auctions look more attractive.
The recent sell-off in interest rates is looking increasingly overblown, especially in Europe. We look for a notable move back lower in rates, with the Fed meeting next week being a potential trigger. Long positions especially in the short end of the EUR curve thus look quite attractive.
The recent considerable rise in rates looks to have taken place too fast, as concerns that the Fed would be close to scaling down stimulus measures have been driving markets. In Europe, not that much has changed and taking advantage of the higher carry available looks much more attractive again.
Equities have often rallied lately in response to negative economic data releases. Why is that and what does it mean for bonds? How should one be positioned ahead of major data releases like the payrolls report on Friday?
The Germans take pride in their Bundesbank and its history of guaranteeing price stability, a very sensitive topic in Germany. Lately, however, the monetary policy choices of the ECB have caused quite a lot of irritation among many Germans. Such irritation will only grow going forward.
After being characterized by a lack of potential and passion for years, the Japanese markets have definitely been reinvigorated by the actions taken by the new government and the central bank. However, is the more than doubling in government bond yields undermining the stimulus of the Bank of Japan?
Going for carry continues to be the name of the game, while the consideration of the credit risks involved seems once again to be a secondary concern. The risks of a bond bubble are no doubt in the air, but this trend has not run its course.
We now expect the ECB to keep rates unchanged at the current level until the beginning of 2015. Risks are clearly skewed towards another rate cut in the near term. Speculation in a deposit rate cut could take market rates to new lows in the near term and we have revised the market rates forecasts lower on all horizons. Lower EUR rates have implications for the EUR/USD forecast in the longer run, and we have decided to lower the end-2014.
It is a well-known fact that the outlook for individual Euro-zone countries is far from uniform. However, it is a misperception that all the northern countries would be doing better than the southern European ones.
Markets have once again started pricing in some risk of a rate cut and a majority of analysts now expect a refi rate cut from the ECB already at the meeting this week. We stick to our call and find it most likely that the ECB will keep rates on hold and instead come up with new measures to support bank lending to Small and Medium-sized Enterprises (SMEs).
If you torture the data long enough, it will confess. One can find hope in today’s Euro-zone credit numbers for March, though if you are pessimistic, the data offers a lot for you as well.
The concept of negative nominal interest rates has usually been considered something possible only as a short-term market aberration. Not anymore. Could negative interest rates really save us?
Big market moves have caught a lot of attention in the past few days. Where is the world going?
We have made a number of adjustments to our financial forecasts including US rates, EUR/USD, GBP, CHF, JPY and base metals. The big story is unchanged!
State Treasury Finland is launching a new 10-year benchmark, RFGB April 2023, at flat area vs mid-swaps, attractive pricing. We see value in maturity extensions from 5-7-year Finnish, German, Dutch, Austrian and French bonds into the new benchmark.
Risk appetite in general has been surprisingly resilient to adverse events in the past few months.
The EU appears to have fast-tracked its plans for bank resolution in earnest, at least based on the comments from the Eurogroup President Dijsselbloem. Such plans are another blow for the funding outlook of banks, and risk escalating the euro crisis again.
A deal on Cyprus was finally reached this morning. Unlike the earlier agreement that basically sent the message that all depositors in troubled banks should immediately withdraw their money, the terms of this agreement actually send a more constructive message. Still, days of wrangling and bad suggestions earlier have hurt the credibility of Euro-zone decision-makers further.
Väestön ikääntymisen Suomen taloudelle tuomien haasteiden pitäisi olla hyvin tiedossa, vaikka ennusteet pitkälle tulevaisuuteen ovatkin aina epävarmoja. Erityisen huolestuttavaa on se, että kun useimmissa muissa kehittyneissä talouksissa on otettu positiivisia askelia väestön ikääntymisen haasteiden voittamisessa, Suomessa on viime vuosina saatettu ottaa jopa takapakkia.
The recent report by the ratings agency Standard & Poor’s shows most countries studied have actually already made a lot of progress in addressing their increasing age-related spending compared to 2010, even though a lot of work remains. One of the most striking aspects of the report is the progress seen in Italy, which could see its rating rise notably going forward.
The Cypriot parliament yesterday rejected the proposed bailout including the controversial levy on bank deposits, putting the future path of Cyprus very much in question again. However, as the alternative for the bailout for the country looks much worse than the terms of the aid package, Cyprus will most likely have to accept the terms in the end.
Here are the usual financial forecast slides with our new financial forecasts published this this morning in Economic Outlook. We have changed our forecast for the Fed, the BoE, the SNB, Riksbanken, Euro rates, USD rates, EUR/USD, JPY, GBP, SEK, NOK, oil and the base metals.
A EUR 10bn bailout for Cyprus was agreed on Saturday. Today, the Cypriot parliament will have to pass the most controversial part of the bailout. In our view, the bailout does not change the overall picture for the Euro area here and now even if the final bailout terms include a haircut on deposits that was supposed to be insured. However, the current deal clearly increases the longer-term risks for the Euro area.
Despite today's weak auctions, the risk of an Italian auction actually failing looks remote. In fact, one should not give too much weight to the performance of individual auctions. Italian troubles will be reflected first on secondary markets, not on weak auction demand. The strong Irish 10-year bond launch carries a stronger message.
The ECB announced today 356 banks would return a total of EUR 61bn of the 3-year money they took from the central bank in the second 3-year LTRO early last year. The numbers illustrate that a considerably amount of excess liquidity will remain in the system for a long time, keeping overnight rates close to current levels. The banking system in general will heal only slowly.
Yesterday’s Fed minutes showed a central bank increasingly divided about the future of asset purchases, even though most participants found the purchases effective in easing financial conditions and helping stimulate economic activity. Still, the Fed clearly wants to be careful not to start removing accommodation too soon or too fast.
Risk sentiment has continued to mostly thrive lately. Improving economic data and continued easy monetary policy should still to provide support, but an increasing amount of event risk and uncertainty in the near future should lead to temporary profit taking and a correction lower in equity prices.
Regulators have been forced to backtrack on many of their most ambitious reforms lately, due to fears that big reforms could really hit the markets and the real economy very negatively. This trend now also continues regarding the planned margin requirements for derivatives, while more “fine tuning” of the planned reforms no doubt lies ahead before any actual implementation.
The other bigger one-time repayment of ECB 3-year loans will take place next week, when the second 3-year LTRO will have its first repayment date. The repayment interest is likely to come below the EUR 137bn seen in the first operation. That said, as we have seen a notable correction lower in short interest rates since the first repayments, risks are tilted towards higher rates and a steeper money market curve ahead of Friday’s data.
This is a regular monthly update of our financial forecasts. See the summary below or the full report via the link. Markets have settled a bit since our 29 Jan update (Markets getting too far ahead of economies). Still, we …
Political risk has been on the rise again in Spain and Italy lately, serving as the latest reminder that the risks inherent in these countries have by no means gone away. As the Spanish corruption scandal is far from resolved, while Italy is headed for uncertain parliamentary elections, market tremors will likely continue in the near future.
De finansielle markeder vil være præget af risikovillighed i den nærmeste fremtid. Men som følge af manglen på fundamentale forbedringer venter vi en korrektion i løbet af foråret.
Risk-on is likely to dominate in the very near-term but given the lack of fundamental improvements we expect to see a correction sometime during the spring.
State Treasury Finland will re-open RFGB 2.75% Jul 2028 on Tuesday, 29 January 2013. The credit quality of Finnish bonds remains solid, as has been illustrated by the recent actions taken by the rating agencies. With the 15-10-year curve looking quite steep, maturity extension offer good pick-up.
The ECB announced that 278 banks will repay a total of EUR 137bn of the 3-year loans taken from the central bank. The amount paid was higher than many had expected, and has put upward pressure on rates. However, one should not draw the conclusion that monetary policy was about to see an abrupt tightening and that rates would be heading higher for good.
Portugal followed in the footsteps of Spain’s hugely successful bond launch yesterday, making a comeback to bond markets for the first time since its bailout from other Euro-zone countries and the IMF. The Portuguese bond sale was just the latest reminder that confidence towards the Euro zone is returning.
Spain saw an unprecedented flood of orders for its new 10-year benchmark, the strongest sign yet that the market conditions have seen a material improvement. Only the yield of around 5.4% serves as a reminder that Spain is still facing some problems – quite significant ones for that matter. With this kind of demand, Spain is making good progress in meeting its huge financing needs for the year.
When the ECB announced its Outright Monetary Transactions (OMT) programme last autumn, Spain was expected to take advantage of the programme rather quickly. The activation of the OMTs would have required an aid programme for Spain, which the country was reluctant to apply for. Could Ireland become the first direct beneficiary of the programme?
Banks will have the first chance to repay the 3-year money borrowed from the ECB on 30 January. Early repayments are likely to give rise to pricing of higher short rates and cause some jitters of tightening policy. Despite the repayments, plenty of excess liquidity will remain, keeping short rates very close to current levels.
The rating agency Standard & Poor’s affirmed Finland’s AAA rating, and changed the outlook for the rating from negative to stable yesterday. After the move, Finland is the only Euro-zone country to have a triple-A rating from all the three major rating agencies with a stable outlook. The move also signals how S&P has seen the effect of the Euro-zone debt crisis fade
We have only made minor changes to the financial forecasts this time: We have lifted our mid-year target for the EUR/USD to 1.25, made minor changes to the GBP forecast, lowered our 3M EUR/SEK forecast to 8.60 and we have postponed the first hike from Norges Bank to March 2014 and only expect two hikes in 2014.
Spain sold a total of EUR 5.8bn of bonds today, which was more than the indicated EUR 4 to 5bn target range for the auctions. This represents just shy of 5% of the estimated total long-term borrowing requirement for the year. Today’s news was certainly positive for Spain, but one should not get too carried away. Spanish issuance needs going forward are daunting.
Greece is starting to see some light at the end of the tunnel, even though the country still has a long way to go. Economic confidence has seen a sharp rebound in the past few months, and is now at its highest level since the country received its first bailout in early 2010. Even the outlook for Greece is thus not all gloomy.
Berlusconi announced on Monday that his party, the People of Freedom (PdL), had formed an electoral pact with Lega Nord. This move increases the risk of a hung government and, in turn, a weak government, exactly what Italy does not need.
The Basel Committee on Banking Supervision announced yesterday it had agreed to considerably loosen its new liquidity requirements. The relaxation of the rules illustrates the regulators are not particularly willing to risk another big hit to the economy due to heavy regulation.