Bond yields edged further up on both sides of the Atlantic yesterday, though the short end yields actually fell a bit and curves thus steepened. Trading volumes were not particularly large.
Yields are likely to continue to creep slightly higher today, but the near-term upside looks limited ahead of all the political uncertainty in store in the weekend.
Considerable volatility continued in especially non-core Euro-zone spreads. The Italian 10-year spread vs Germany widened another 7bp, while the corresponding Spanish spread expanded by some 4bp. The widening pressure is likely to continue in the near term ahead of the European Parliamentary elections, but the moves should represent only a short-term correction higher in a trend of narrowing spread. In the semi-core, Finnish bonds actually performed somewhat better than most for a change.
Equity markets saw mixed performance. European equities retreated slightly overall, while US equities gained (S&P 500 up by 0.38%). Asian equities are trading mostly with small gains this morning, and Europe is set to open marginally higher.
Putin announces troop withdrawal, again – uncertainty to prevail ahead of elections
Russian President Putin was reported to have ordered Russian troops near the Ukrainian border to return to their bases, but US and NATO officials said they had seen no immediate evidence of a withdrawal, something that has happened before. Russian Prime Minister Medvedev, in turn, said that Russia was moving slowly but surely into a second Cold War.
Despite Russia’s pledges, the looming Presidential election in Ukraine on Sunday should keep uncertainty elevated for the remainder of the week. However, if the elections pass without bigger bouts of violence, there is a good chance we will see more notable relief early next week.
Calm data day – central bank speeches continue
Today’s calendar does not look particularly interesting. UK April CPI numbers will be released at 10:30 CET, while the ECB will release the results of its latest refinancing operation at 11:15 CET.
In terms of central bank speeches, the ECB’s Linde and Liikanen will speak at 16:30 CET, Nowotny at 18:00 CET, the Fed’s Plosser at 18:30 CET, Dudley at 19:00 CET and the BoE’s Bean at 19:30 CET.
Finland to sell 10- and 30-year bonds
Finland will re-open bonds maturing in 2024 and 2042 today for a maximum of EUR 1.5bn. We see better value in the 10-year benchmark.
The European Financial Stability Facility, in turn, is set to launch a new 10-year EUR benchmark today. Initial price thoughts are at the mid-swaps +20bp area.
Nordea