German bond yields headed higher for a change yesterday, while the curve steepened a bit. The 10-year yield ended the day up by 1bp. US yields, in turn, mostly fell very modestly.
Spread narrowing continued in the Euro-area government bond markets. The Spanish 10-year yield fell below 2% for the first time ever, while Italian and Irish yields hit record-lows as well.
Core yields are set to creep a bit higher today, while spreads have more narrowing potential.
Equity markets saw rather limited moves in general. In Europe, the Stoxx 600 gained 0.14%, while S&P 500 climbed a further 0.29% to new closing highs. Asian markets are trading somewhat mixed this morning, while Europe is set to open with limited changes.
Juncker’s investment programme lacking teeth
Plenty of details have already been leaked about Mr Juncker’s EUR 300bn investment programme, due to be officially revealed this week. According to EU officials, the fund would have EUR 21bn of seed money that would be leveraged with private money to reach a total programme size of more than EUR 300bn. The goal is to be able to fund higher-risk projects than e.g. the European Investment Bank is currently doing.
The goal of reaching a leverage ratio of 15 looks very ambitious, especially as it seems the scheme will not include a first-loss mechanism, where private money could be attracted by guaranteeing that the first losses in the projects would be borne by the public contribution, at least initially. Also the EUR 21bn of EU funds to be used is rather modest in size, much lower than many have been calling. Finally, the goal seemingly is to propose the more exact legislation in January, and then approve it by the middle of next year, so at a minimum, it will still take a long time for the programme to start running. In short then, one should not have too high hopes that Mr Juncker’s programme would materially boost the Euro-area economic outlook.
German Ifo rebounds – German outlook still clouded
After six consecutive declines, the German Ifo expectations index surprised positively with a rebound from 98.3 to 99.7. Increasing confidence took place on a broad front, and was a positive sign after the latest drop in the PMIs. The recent Ifo reading suggests the German economy will continue to grow going forward, but only at a subdued pace.
Plenty of US economic data on the agenda
Today will see the release of a large batch of US economic data, though nothing hugely exciting. The second release of US Q3 GDP is set to see a small downward revision at 14:30 CET, while FHFA and S&P / Case-Shiller September house price data will be out at 15:00 CET & Conference Board consumer confidence at 16:00 CET.
In Europe, the French INSEE business confidence indicator will be released at 8:45 CET, the ECB’s Nowotny will speak at 10:15 CET and BoE’s Carney at 11:00 CET.
Dutch and US issuance
The Netherlands will re-open its 10-year benchmark for EUR 1.5 to 2.5bn today. US auctions, in turn, will continue with USD 13bn of 2-year floating-rate notes and USD 35bn of 5-year notes.
Nordea