Core bond yields climbed yesterday, more so in the US than in Germany. The German 10-year yield edged higher by less than a bp, while the US 10-year yield rose by around 3bp. These moves left the German 10-year yield around 4bp higher than the intraday low of 1.17% from last week. Trading volumes were rather low, though.
Intra-Euro-zone spreads narrowed, led by Portugal, as the tensions around the Portuguese banking sector eased. The Portuguese 10-year yield fell by around 6bp. The worst fears over the Portuguese situation escalating have clearly subsided for now, even though the bank in the centre of the worries remains under pressure.
Yesterday’s moves are likely to continue today: slightly higher core rates and tighter intra-Euro-zone bond spreads.
Equity markets continued to rebound yesterday across the board. The main European indices gained slightly less than 1%, while US equities advanced by around 0.5%. Such price action left US equities targeting new record highs again, while European equities have a bigger gap to their recent highs. Asian equities are trading mostly with gains this morning.
China’s credit growth accelerates
Chinese loan data released earlier today came in above expectations, illustrating the recent stimulus measures taken are having an effect. Aggregate financing rebounded from RMB 1.40bn to 1.97bn in June, while new loans jumped to their highest level since January. The data increase expectations ahead of China’s Q2 GDP numbers released early tomorrow.
Yellen to try to sound dovish again
Today’s calendar has quite a lot to offer. The highlights will be US June retail sales at 14:30 CET and the Fed’s Yellen’s semi-annual testimony to the Senate Committee on Banking, Housing and Urban Affairs at 16:00 CET. The Fed outlook should not have changed materially since the June meeting, but especially considering the recent fall in yields, there is a risk she will say something in the Q&A that will be interpreted hawkishly.
Underlying US retail sales growth, in turn, should have performed better after a couple of disappointing months. In addition, the New York Fed manufacturing index will be released at 14:30 CET.
In Europe, UK inflation should have rebounded in June (figures out at 10:30 CET) and the German ZEW expectations index will likely continue to fall at 11:00 CET. Further, the ECB’s Noyer will speak at 9:30 CET, the nominated President for the European Commission Juncker will be before the European Parliament at 10:00 CET, BoE’s Carney will testify to the House of Commons Treasury Committee at 11:00 CET and the ECB main refinancing operation results will be out at 11:10 CET
Nordea