Bond yields edged higher yesterday on both sides of the Atlantic, but trading volumes were very subdued due to the UK holiday. E.g. the daily volume for the front contract of the Bund future was down 75% compared to Friday. Longer US yields saw slightly bigger moves, with the 30-year yield climbing by 4bp and the curve steepening.
The Eonia overnight rate edged further down to below 13bp, further supporting the picture of calmed money markets.
Yesterday’s moves are likely to be extended into today, and yields creep further up.
European equities retreated slightly, while in the US S&P 500 edged higher by 0.19%. Asian equities are trading mostly with small gains today (though Japan and South Korea are both closed), and also Europe is set to open up.
ECB’s Mersch points to looming help to the ABS market
The ECB’s Mersch commented yesterday he was very confident that the ECB would be able to add some further initiative supporting the ABS market in the near future. He added the regulatory treatment of securitization should be revised to better reflect the risk-mitigating features of high-quality securitization and to address current inconsistencies in the legislation, something the ECB has argued before. His comments suggest that the ECB is getting closer to announcing the ABS programme it has been planning in one form or another for more than a year already.
Outlook for US business loans rosy – mortgages doing worse
The Fed’s latest Senior Loan Officer Opinion Survey on Bank Lending Practices showed that banks had eased their lending policies for commercial and industrial loans and experienced stronger demand for these loans over the past three months. However, demand for mortgages had weakened clearly, while standards for non-traditional mortgages had been tightened. The survey thus supports a rise in US business investment, while it suggests the housing market recovery will continue to struggle.
The US non-manufacturing ISM index, in turn, supported the notion that Q2 will look much better for the US economy than Q1 did. The index rose from 53.1 to 55.2, the highest since last summer, supported by higher new orders and production. Somewhat disappointingly, however, the employment index retreated to 51.3.
US trade balance numbers and ECB liquidity numbers ahead
Today’s calendar looks rather light. In terms of economic data, the final April Euro-zone services PMI will be released at 10:00 CET, UK services PMI at 10:30 CET, Euro-zone March retail sales at 11:00 CET and US March trade balance at 14:30 CET. In addition, it will be interesting to see, how much the demand at the ECB’s main refinancing operation will fall from the EUR 173bn taken last week. The OECD, in turn, will release its Global Economic Outlook at 11:00 CET.
Austria and the US to sell bonds
Austria will re-open bonds maturing in 2018 and 2034 for a combined EUR 1.1bn today. In the US, in turn, USD 29bn of 3-year notes will be sold.
Nordea