German bond yields fell yesterday, as did US yields, but the moves were quite limited. The German 10-year yield ended the day lower by some 2bp, and has been moving around 1.25% in the past few days. The record low of 1.13% provides support.
Intra-Euro-zone spreads jumped, with especially Portuguese bonds continuing to feel pressure due to worries surrounding Banco Espirito Santo.
Bonds are set to remain supported today. Geopolitical concerns will continue, as the Ukrainian President Poroshenko called an end to a temporary cease-fire with the separatists.
The Eonia overnight rate was lifted again by the quarter end, with the rate jumping to 34bp, but it will slump again today.
Equities ended the day roughly flat on both sides of the Atlantic, but are trading mostly higher in Asian markets this morning. Europe is set to open roughly flat, though.
More positive numbers from the US housing market
The US pending home sales index surged by 6.1% m/m in May, following positive surprises in existing and new home sales earlier. This left the index at its highest level in 9 months, though it is still around 7% lower compared to a year earlier. The index supports the picture of a housing market picking up steam again. The rather modest market reaction further implies it takes more than an improving housing market to lift yields.
In China, the official manufacturing PMI increased from 50.8 to 51.0 in June, a 6-month high. The increase was expected and is in line with the message given by the HSBC / Markit PMI earlier.
Subdued Euro-zone price pressures continue
Euro-zone inflation stayed put at a modest 0.5% y/y in June. Euro-zone inflation as a whole thus did not mimic the rise seen in German numbers earlier. Core inflation (ex. energy, food, alcohol and tobacco), however, edged higher from 0.7% y/y to 0.8% due to higher services inflation, but the services inflation has been exhibiting rather large volatility in the past few months. Overall, inflation remains subdued, but yesterday’s numbers did not really change the inflation and thus the ECB outlook.
Manufacturing PMIs the name of the game
Today’s calendar is full of manufacturing PMI data. The highlight will be the US manufacturing ISM index at 16:00 CET. Risks are tilted to the upside, but expectations are likely also rather high after the strong Markit manufacturing PMI released earlier.
In the Euro zone, final June manufacturing PMI numbers will be out 10:00 CET and the May unemployment rate at 11:00 CET. In addition, the ECB’s Nowotny will speak 11:00 CET, while the ECB’s main refinancing operation results will be out at 11:15 CET.
Nordea