German bond yields edged higher on Friday, while longer US yields ended the day slightly down. The bigger picture did not change: yields remain low and are facing resistance towards a more notable rise. Intra-Euro-zone spreads mostly saw modest widening.
Bond yields are set to head a bit higher today on the back of the upside surprises seen in Asian PMI data (see more below).
European equities faced some pressure on Friday, while in the US S&P 500 managed to rise to another record after a 0.17% gain. Asian equities are mostly trading with rather limited moves this morning, while Europe is set to open close to flat.
China’s PMI points to stabilizing growth
China’s June flash HSBC/Markit manufacturing PMI surprised positively with an advance from 49.4 to 50.8, a 7-month high. The numbers suggest China’s data momentum is finally picking up and growth is stabilizing. Also Japan’s Markit manufacturing PMI provided a positive surprise: the index jumped from 49.9 in May to 51.1 in June, though it remains clearly lower than the 56.6 seen in January.
Draghi seeks to clarify the ECB’s forward guidance further
The ECB’s Draghi commented in an interview over the weekend that the prolonged access by banks to unlimited liquidity up to the end of 2016 was a signal on rates. He added that the ECB’s programme in support of bank lending would continue for four years, which showed interest rates would remain low over a longer period. The ECB’s Nowotny, in turn, said that growth was unlikely to be strong enough to support higher rates at least before 2016. In other words, the ECB does not expect to raise rates for several years.
Euro-zone PMIs, German inflation and US home sales numbers ahead
This week’s data calendar has a few interesting numbers in store. The action today will start today with the June Euro-zone flash PMIs at 10:00 CET. French numbers will be out already at 9:00 CET, and German ones at 9:30 CET. The Chinese and Japanese data released earlier today suggest Euro-zone confidence will remain at rather good levels.
Later in the week, the German Ifo index will be released tomorrow, while preliminary June German inflation numbers will gather a lot of interest on Friday.
In the US, the main focus will be on the preliminary Markit manufacturing PMI today at 15:45 CET, May existing home sales at 16:00 CET, April home prices and May new home sales tomorrow and the May personal spending report on Thursday.
Further in today’s calendar, the ECB’s Constancio will speak at 9:00 CET, Mersch at 14:00 CET and Nowotny at 17:30 CET.
Belgium setting this week’s auctions in motion
Belgium will start this week’s supply today, when it will re-open bonds maturing in 2024, 2028 and 2045 for a combined EUR 1.8 to 2.3bn. The Netherlands will re-open bonds maturing in 2016 and 2042 for EUR 1 to 2bn tomorrow, while Italy will sell linkers and zero-coupon bonds on Wednesday and benchmark bonds on Friday.
In the US, USD 30bn of 2-year notes will be sold tomorrow, USD 13bn of 2-year floating-rate notes & USD 35bn of 5-year notes on Wednesday and USD 29bn of 7-year notes on Friday.
Coupon and redemption payments from EUR government bonds will amount to only around EUR 2bn this week, but a massive EUR 52bn flow will be in store for next week.
Nordea