German bond yields edged up yesterday after the drop in the previous days, but US bonds continued to perform. The German 10-year yield ended the day up by some 2bp, while the corresponding US yield fell by roughly as much. Intra-Euro-zone spreads mostly saw a modest widening. EUR/USD, in turn, rose back to around 1.38, and if the move continues, it will cause more worries at the ECB.
European equities took some losses, but in the US S&P 500 managed to record a gain of 0.38%. Asian equities are trading mostly up this morning, apart from Japan, and also Europe is set to open slightly higher.
Risk-reward continues to favour long positions in bonds today, both because of rising tensions in Ukraine and the Fed minutes.
Fed minutes to clarify rate hikes not around the corner
The message from the Fed was interpreted rather hawkishly after last month’s meeting, as the main focus was captured by the higher interest rate forecasts and Chair Yellen’s reference to the first hike possibly taking place already around six months after the end of bond purchases. However, Yellen also sought to play down the new forecasts by saying that almost nothing had changed, which should also be illustrated in the minutes. As a result then, bonds could perform a bit more after the release of the minutes. The minutes will be released at 20:00 CET.
Elsewhere in the calendar, the Swedish Riksbank will reveal interest rate decision at 9:30 CET, while the ECB’s Lautenschläger will speak at 11:45 CET, Cœuré at 16:00 CET and the Fed’s Evans at 21:30 CET. Mr Cœuré’s comments could easily take a slightly more dovish stance on further action compared to some of the other ECB members voicing their opinions earlier in the week.
Germany and the US to auction bonds – also Greece in the pipeline
Bond issuance will continue today at a brisk pace. Germany will re-open its 2-year benchmark for EUR 4bn. US auctions, in turn, will continue with USD 21bn of 10-year notes.
In addition, Dow Jones reports that Greece would enter the market already today for a EUR 2bn 5-year offering, its first since the bailout.
Nordea