German bonds surrendered early gains to end with some losses yesterday, while US Treasury yields saw a bigger upward move. The German 10-year yield ended the day up by some 2bp, while the US 10-year yield jumped by 6bp, offsetting a big part of the fall seen last Friday.
Intra-Euro-area spreads narrowed. Italian and Spanish 10-year spreads vs Germany contracted by around 5bp. Spanish bonds continue to appear immune to the risks involving the Catalan issue, but could easily feel pressure going forward.
Core yields are likely to creep lower again today, as the chances of another round of Russian sanctions increase. The US Veterans Day holiday will limit trading volumes. Equities had a positive day on both sides of the Atlantic. The Stoxx 600 gained 0.97%, while S&P 500 hit another record high after a 0.31% rise. The technical picture for US equities has clearly improved again. Asian equities are trading mixed this morning, while Europe is set to open slightly higher.
Russia floats the ruble – problems continue to mount
The Russian central bank abandoned its RUB corridor yesterday and abolished planned currency interventions, increasing exchange rate flexibility. However the central bank said it could still intervene at any moment, if needed.
The ruble has been hit lately by a combination of the sanctions placed on Russia, the already weak economy and the falling oil price, which have delivered a big blow to Russia. The currency has plunged by more than 30% vs the US dollar since the summer, but actually recovered some yesterday after the central bank’s decision.
The outlook remains much clouded, and the ruble will continue to feel downside pressure, keeping the central bank busy – especially as another round of sanctions against Russia looms and the oil price continues to head lower.
US small business confidence and German & Dutch auctions
Today’s calendar looks very light. The ECB’s Linde will speak at 10:00 CET, while the US NFIB small business optimism index will be released at 14:30 CET.
On the issuance front, the Netherlands will re-open its 30-year benchmark (maturing in 2047) for EUR 1 to 2bn, while Germany will tap its 2030 inflation-linker for EUR 1bn.
Nordea