Bond yields continued to fall yesterday, especially in the US, where the 10-year yield retreated by almost 6bp. US bonds were boosted by a positive 5-year note auction (bid-to-cover the highest in 1.5 years). Intra-Euro-zone bond spreads narrowed clearly.
European equities had another good day, US ones less so. After a positive open, S&P 500 finally ended the day down by 0.70%. There is thus clear resistance for further gains at current levels, as the index has struggled to produce further gains for around 3 weeks now. A similar period of a sideways movement early this year was followed by a clear move lower, before buyers re-emerged. Such a correction lower could easily be in the cards in the near future this time as well.
Asian equities are trading mostly with minor gains this morning, but European equities are set to open lower.
Bond market sentiment remains rather strong at the moment, and bonds could perform a bit further today.
Longer ECB liquidity not in demand
Demand at the ECB’s latest 3-month refinancing operation totalled EUR 12bn, some 9bn less compared to the maturing amount. This offset only part of the EUR 24bn net liquidity injection due to a bigger uptake in the weekly refinancing operation. In fact, the demand at the weekly refinancing operation was the largest seen this year, implying some banks are increasing their borrowing from the central bank, as excess liquidity would otherwise decline much more due to LTRO repayments. The fact that they do so in the weekly operation rather than the longer 3-month operation suggests they want to preserve as much flexibility as possible. Going forward, the eonia overnight rate will continue to see slight upward pressure.
Finland and Austria to retain their stable outlooks
Rating reviews are again in the calendar tomorrow, and both Standard & Poor’s and Fitch usually release their decisions already early in the morning. Fitch is highly likely to retain its stable outlook and AAA rating on Finland, as the rather low Finnish debt along with a good track record should mean the Finnish triple-A ratings are not in any immediate jeopardy. Finnish bonds could thus soon start to perform again.
Standard & Poor’s, in turn, will most likely keep its stable outlook on the Austrian AA+ rating. After all, S&P already rates Austria one notch lower than Fitch and Moody’s, both of which have stable outlooks on their ratings.
Euro-zone credit data and US pending home sales ahead
Today’s data calendar includes a bunch of numbers worth watching. In the Euro zone, February credit numbers at 10:00 CET are likely to continue to paint a rather sombre picture. In the UK, the main focus will be captured by the February retail sales at 10:30 CET.
In the US, weekly jobless claims and the third release of Q4 2013 GDP will see daylight at 13:30 CET, while the February pending home sales index will have its turn at 15:00 CET.
In addition, the Fed’s Pianalto will speak at 13:30 CET, the ECB’s Liikanen will speak at 16:30 CET and Costa will speak at 19:00 CET.
This week’s US benchmark auctions, in turn, will be concluded by the USD 29bn 7-year note auction.
Nordea