Bond yields rose yesterday on both sides of the Atlantic, more so in the US than in the Euro zone. The US 10-year yield jumped by 4bp, while the German 10-year yield climbed a more subdued 1bp.
Intra-Euro-zone bond spreads widened, and especially Finnish bonds continued to see pressure, something that is likely to continue in the near future.
German yields should have some room to climb today, while the pace of increase is likely to moderate in the US.
Equities had a strong day. Many European indices have surged to multi-year highs, e.g. the Stoxx 600 rose by 0.72% to hit its best level since early 2008. In the US, S&P 500 advanced by 0.97% to end at its best closing ever, just a tad shy of the intraday high on 4 April. The equity market is thus going strong, and showing no signs of any crisis. Also Asian markets are trading mostly with gains this morning, and Europe is set to open further up.
April industrial production, investment and industrial production data from China, just released, came in a tad below expectation, but do not change the overall picture materially.
Package of ECB easing measures in the pipeline
The ECB’s Nowotny commented yesterday that if the ECB went for more easing, he thought it should be a package of measures instead of just a simple rate cut. He did not want to elaborate on the contents of such a package. His comments certainly make sense, since too vague action could easily end up being counter-productive by giving a message that the ECB is either not willing or able to do anything real any more. In fact, a package of measures, consisting of rate cuts, including a negative deposit rate, liquidity measures and possibly also a small-scale ABS purchase programme is likely to be announced at the June meeting.
Spain joins inflation-linked issuers
Spain mandated the leads for its inaugural inflation-linked bond yesterday, maturing in November 2024 and linked to the European HICP ex tobacco. The minimum size target for the bond was reportedly a modest EUR 0.5bn, which should be easily exceeded. The launch is likely to take place today.
Germans with a chance to strike back – US retail sales the data highlight
ECB speeches will continue today, and it will be especially interesting to hear the German opinions in the aftermath of last week’s signals from Draghi. Both Lautenschläger and Weidmann are set to speak at 11:00 CET. The Fed’s Lacker, in turn, will speak at 16:30 CET.
In terms of today’s economic data, the highlight will be the US April retail sales report at 14:30 CET. In other data, the German ZEW index will be released at 11:00 CET, and the US NFIB small business optimism index at 13:30 CET.
In addition, the ECB will release the results of its latest main refinancing operation at 11:15 CET.
All the issuance fun starts today
Today’s calendar has quite a lot to offer in terms of bond auctions. The Netherlands will re-open its 10-year benchmark for EUR 2 to 3bn, Germany will tap its 2018 linker for EUR 1bn, while Italy will launch a new May 2017 bond for EUR 3.5 to 4.5bn as well as re-open bonds maturing in 2021 for EUR 1.75 to 2.25bn and in 2034 & 2037 for a combined EUR 0.5 to 1.0bn.
Nordea