Core bond yields edged higher yesterday, though the moves were quite limited. The German 10-year yield closed higher by about a bp. Intra-Euro-zone bond spreads narrowed further, and especially Portuguese bonds rallied (the 10-year yield down by more than 10bp to around 3.75%).
Equity rebound continued, with S&P 500 up by 1.05%, but more weakness could easily be seen today. Asian equities are trading up this morning as well, but the moves have been rather limited. Europe is set to open close to flat.
With e.g. the tense situation in Ukraine continuing, many will likely favour safe positions ahead of the Easter holidays. Long positions in bonds thus look attractive today.
Euro-zone core inflation back to record-lows
The Euro-zone March inflation was confirmed at 0.5% y/y, but the core rate (excluding energy, food, alcohol and tobacco) was revised lower from 0.8% y/y to 0.7%, equalling the record low seen in December. The numbers illustrate the subdued price pressures, and the ECB will watch the April flash estimate out on 30 April very carefully.
Italy taps retail investors for huge amounts again
Italy raised EUR 10bn from retail investors with its sixth BTP Italia, a 6-year bond indexed to Italian inflation. Institutional investors have a chance to buy the bond today. The five previous issues have totalled more than EUR 66bn combined, illustrating how the Italian Treasury is able to rely on the wealthy Italian households for a big chunk of its funding – a very positive factor considering Italy’s large funding needs.
Big US banks boosting their lending to companies – Euro-zone doing much worse
The Wall Street Journal has calculated that the six biggest US banks by assets increased their commercial lending by 8.3% y/y in the first quarter of this year, another clear sign of the economic recovery ongoing in the US. Things look quite different in the Euro zone, where loans to non-financial companies contracted by around 3% y/y in February, further illustrating the very differing fortunes of the US and Euro-zone economies.
Philly Fed, jobless claims and LTRO repayment announcement
The highlights today include the ECB’s 3-year LTRO repayment announcement at 12:00 CET, US initial jobless claims at 14:30 CET and the Philadelphia Fed manufacturing index at 16:00 CET. In addition, the ECB’s Mersch will speak at 16:00 CET, while a flood of corporate earnings releases will see daylight.
New French 2-year benchmark and US auctions ahead
France will auction a new 2-year benchmark today as well as re-open a 5-year bond for a combined EUR 7 to 8bn. In addition, the country will sell inflation-linkers for EUR 1 to 1.5bn. In the US, USD 18bn of 5-year TIPS will be offered.
Nordea