Bond yields ended yesterday mostly lower despite gains in equity markets, though the moves were once again rather limited. Intra-Euro-zone spreads mostly narrowed, though Finnish bonds saw some pressure.
Asian equity markets are trading mixed this morning, following broad gains in the US yesterday (S&P 500 up by 0.72%). Bond yields are set to see some upward pressure today, though the risks of some more flight-to-quality flows returning have not totally disappeared.
Greece plans bond market return soon
The Greek Infrastructure Minister Chrisochoides said Greece would aim to sell bonds before the European Parliament elections in May, as Greece finally reached yet another agreement with the troika. Greek bonds rallied on the news. With the current appetite for pick-up, it looks very possible Greece would find demand for a bond issue, and many would actually likely welcome the return of a higher-yield government issuer. Still, it will still take a long time, before Greece can rely fully on market financing.
The improving sentiment was also illustrated, as Piraeus Bank gathered an order book of more than EUR 3bn for the first senior unsecured Greek bank bond in five years. The EUR 0.5bn March 2017 issue will pay a EUR 5.125% yield, lower than the earlier guidance of 5.25% – 5.5%.
Putin manages to offer some reassurance – some violence in the Crimea
Russian President Putin signed treaties yesterday to annex Crimea into Russia, but at the same time reassured Russia would not have any other plans for other regions of Ukraine. Some violence also broke out yesterday, as a Ukrainian soldier had been shot dead in a clash with masked militants in Simferopol. Although more sanctions from the EU and US look likely in the near future, barring an escalation of violence, the issue will gradually lose importance in driving financial markets. Still, the issue is far from resolved, and risks of another escalation have not disappeared, so some cautiousness is in order.
US building permit data worse than it looks
US housing starts came in close to January levels in February, 907k vs 909k, but building permits showed a surprising jump from 945k to 1018k. Unfortunately, the rise was due to the volatile multi-family category of permits, while the more stable single-family permits declined for the third month in a row. Bad weather is still affecting the data, but the latest numbers are not particularly encouraging.
Fed to tweak its forward guidance
In her first meeting as Chair, Dr. Yellen will continue on the tapering path of USD 10bn per meeting. The main focus will thus be on the message of the FOMC and more particularly likely changes to the Fed’s forward guidance. The Fed will likely replace its guidance linked to the unemployment rate with a more qualitative approach. The change should not lead to any huge market moves, but risks are tilted towards a slightly hawkish interpretation in markets and higher yields. The Fed’s monetary policy decision will be announced at 19:00 CET, while the press conference will commence at 19:30 CET.
Elsewhere in the calendar, BoE minutes will be out at 10:30 CET, while municipality elections will be held in the Netherlands.
German 10-year auction on the agenda
Germany will continue implementing its issuance strategy today with a EUR 4bn 10-year re-opening, the last German auction scheduled for Q1. The results will be released at 11:30 CET.
Nordea