US Bond Yields Stabilise Despite Massive Supply

US Bond Yields Stabilise Despite Massive Supply

Market movers right now

  • One other quiet day awaits us with few alerts from the information entrance. Fed’s Kaplan and Daly might be on the wires later within the day.
  • In Denmark, international reserve figures for April are launched and it is going to be attention-grabbing to see whether or not Danmarks Nationalbank continued to intervene within the FX market.

The 60 second overview

Macro: Feedback from Fed Chairman Powell and New York Federal Reserve governor Williams supported US authorities bonds, and 10Y yields declined modestly. Powell said that restoration is “patchy”, whereas Williams said that “We nonetheless have an extended solution to go to attain a strong and full financial restoration” despite the fact that he’s optimistic relating to the financial outlook, whereas inflation will settle again round 2%.

There might be loads of US Treasury bonds on the market in coming months as the web sale of US Treasury bonds will go from some USD 100bn to USD 460bn for Q2 for the reason that Treasury division has to finance the extra spending from Joe Biden’s fiscal stimulus packages. Nonetheless, the impression on the Treasury market was modest because the market had anticipated a big enhance within the issuance.

Equities: Equities largely larger yesterday pushed by power and supplies sectors. It was a comparatively quiet day however nonetheless with 2% efficiency distinction between one of the best to the worst sector yesterday. Worth continued to outperform progress for the fifth consecutive day whereas defensives beat cyclicals regardless of the risk-on mode. Asian equities blended this morning in a session nonetheless affected by the general public holidays in mainland China and Japan. European and US futures barely decrease. UK futures are larger as they’re catching up from the shut yesterday.

FI: European core charges ended just about unchanged on the day after touching some 3bp larger yields within the morning session to new highs since March final 12 months. Peripheral spreads tightened to core by 2-3bp led by Italy. There was no obvious driver of the strikes.

FX: EUR/USD rose yesterday in keeping with our expectation to a bounce in equities and the seemingly rally, following final Friday’s sell-off. Danmarks Nationalbank could select to chop charges by 10bp on Thursday and therefore right now’s FX reserve numbers are key to observe. We see EUR/SEK as primarily range-bound between 10.10-10.20 for the approaching weeks.

Credit score: Buying and selling was skinny in EUR credit score yesterday, as UK was out on account of public vacation, which means there was no buying and selling in iTraxx indices. Each HY and IG bonds have been unchanged.

Nordic macro and markets

Denmark. The Danish Central Financial institution will publish FX reserves at 5pm. If there was important intervention, then this may gasoline hypothesis relating to a attainable price reduce of 10bp and help the entrance finish of the Danish yield curve and tighten the unfold to German authorities bonds in addition to decreasing the EURDKK 3M FX ahead.

Within the mortgage market, complete prepayments for the July time period ended at DKK 26.9bn. Therefore the reinvestment want will decline considerably relative to earlier quarters the place the overall prepayments have been above DKK 73bn, however with decrease prepayments there will even be much less issuance.

Sweden. At this time at 10:00, the Riksdag Committee on Finance will maintain an open listening to on the Riksbank’s Account of Financial Coverage 2020. A part of the Riksbank’s independence is that yearly the Committee on Finance examines and assesses the financial coverage carried out by the Riksbank throughout the instantly previous years. Whereas formally and democratically essential, these gatherings seldom supply any coverage information. The housing market and distribution of earnings and wealth will most likely draw politicians’ consideration, much more so than inflation.


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