German bond yields ended the day slightly lower yesterday, but above their intra-day lows. The German 10-year yield edged lower by a bp, while the corresponding US yield fell only marginally.
Volatility continued in intra-Euro-area spreads, which widened across the board again. Italian and Spanish 10-year spreads to Germany leapt by more than 10bp. For a change, Greek bonds fared better. Nervousness in EUR government bond markets is set to continue for now, contributing to wider spreads, but the prospects of more ECB stimulus in store should limit the upside potential of the move. The start of the ECB’s covered bond purchase programme yesterday failed to impress.
Core bonds are set to remain supported today, and yields edge further lower. The US 10-year yield has already fallen by around 4bp overnight in Asian trading.
European equities were under pressure again, and prices fell, but generally less than 1%. In the US, S&P 500 did clearly better, gaining by 0.91%. Equity markets are not out of the woods yet, and continue to feel the heat. Asian markets are trading mostly lower this morning, as China’s economic did not impress (see more below), and also Europe is set to open slightly lower.
China keeps slowing, but so far in a managed fashion
China’s economic growth slowed from 7.5% y/y to 7.3%, slightly above expectations but the slowest growth rate since the first quarter of 2009. After these numbers, meeting the annual growth target of 7.5% will be hard.
China also released plenty of data for September. Fixed asset investment and retail sales growth continued to slow, but industrial production growth rebounded from 6.9% y/y to 8.0%, above expectations but still the second weakest monthly growth rate in more than five years. So far, the Chinese economy has avoided an abrupt slowdown, but risks remain on the downside.
US existing home sales and Finnish bond auction ahead
The rest of today’s economic data calendar does not look particularly heavy. US September existing home sales will be released at 16:00 CET.
On the issuance front, Finland will re-open RFGB 2.75% Jul 2028 for a maximum of EUR 1bn.
Nordea