Core bonds initially rallied yesterday, but then started to feel pressure in the evening and yields finally ended the day higher. The German 10-year yield rose by around 2bp and the US 10-year one roughly half of that. The US 10-year yield is now at its highest in just over a month. Intra-Euro-area spreads mostly edged wider.
Yields are set to continue to creep higher early today, but news of violence in Ukraine could easily give bonds another boost later in the day.
Equity markets ended the day with some losses on both sides of the Atlantic (S&P 500 down by 0.31%). Asian markets are trading with limited moves this morning, and Europe is set to open slightly lower.
EU delays new sanctions on Russia
The EU decided to put new sanctions on Russia on hold for at least a few days to allow more time to assess the viability of the cease-fire in place in Ukraine. The new measures have been agreed in principle, and can be implemented quickly, if needed. The cease-fire continues to look shaky, and risks are clearly tilted towards the truce not holding and the conflict continuing for a long time, which should limit near-term pressure on core bonds.
Spanish house prices turn higher
House prices in Spain rose in y/y terms in Q2 for the first time since early 2008, according to the National Statistics Institute. Prices increased by 1.7% q/q, 0.8% y/y in the second quarter. The housing recovery in Spain continues to look very tentative, as e.g. building permits remain more than 90% lower compared to the levels before the crisis. Nevertheless, the house price data adds to the positive news stemming from the Spanish economy.
US small business optimism and UK industrial production
Today’s calendar looks very light. UK July industrial production data will be released at 10:30 CET, while the US NFIB small business optimism index will have its turn at 13:30 CET and the US job openings and labour turnover survey (JOLTS) at 16:00 CET. In addition, the ECB’s Liikanen will speak at 11:30 CET and the Fed’s Tarullo at 16:00 CET.
Plenty of supply action
As opposed to the economic data calendar, today’s auction calendar looks rather packed. Austria, will re-open bonds maturing in 2024 and 2034 for a combined EUR 1.21bn, the Netherlands will tap its 10-year benchmark for EUR 1.5 to 2.5bn, while Germany will sell its 2030 inflation-linker for EUR 1bn. In the US, USD 27bn of 3-year notes will be offered.
Nordea