The German 10-year yield touched 1.49% again yesterday, but could still not make a convincing break lower. Better-than-expected US retail sales (see more below) sent the yield higher again later, and the yield finally ended up by 2bp, similar to the US 10-year yield.
The technical picture and momentum still point towards a lower German 10-year yield, and a fall below 1.50% is in the cards in the next few days. Another attack lower could be seen already today.
Intra-Euro-zone spreads mostly narrowed, though Greek bonds continued to feel pressure. The Greek 10-year yield has now rebounded by more than 50bp from the lows seen last week.
Equities rebounded yesterday, and S&P 500 rose by 0.82%. That performance has not been extended into Asia, where equities are trading mostly lower this morning. Europe is set to open slightly up, though, but the correction lower in prices should have more room to go.
US retail sales beat expectations
US retail sales jumped by 1.1% m/m on the headline level in March, while the February gain was revised up to 0.7%, making the report much better than expected. After a weaker period late last year and early this year, the recent numbers suggest growth would be picking up. Still, the 3m/3m annualized growth rate in core sales rose only modestly to 0.2%, and thus remains at a rather subdued level, but has been affected by bad weather. Better consumption numbers are thus likely to lie ahead.
Eyes on US CPI and Yellen’s speech
US March CPI at 14:30 CET is set to see a clear rebound from the 1.1% y/y reading seen in February, but the core rate will see less movement. However, risks are tilted to the downside, as the momentum in core inflation looks rather weak. Fed Chair Janet Yellen’s speech at 14:45 CET will be listened to carefully as well, though as she will also give opening remarks via a videoconference, new monetary policy signals look unlikely.
Other US data out today include the US Fed manufacturing index at 14:30 CET, the February capital flow data at 15:00 CET and the NAHB housing market index at 16:00 CET, while interesting corporate earnings reports will continue.
In Europe, UK March CPI will be released at 10:30 CET and the German ZEW index at 11:00 CET.
In addition, the Fed’s Lockhart will speak at 14:30 CET, Plosser at 21:00 CET and Rosengren at 22:00 CET
Nordea