Search Results: 85
Pantheon Macroeconomics aims to be the premier provider of unbiased, independent macroeconomic intelligence to financial market professionals around the world.
Sorry, but our website is best viewed on a device with a screen width greater than 320px. You can contact us at: email@example.com.
85 matches for " bond yields":
Inflation in the Eurozone jumped in December, and will surge further in Q1 as base effects from last year's crash in oil prices push energy inflation higher. Higher inflation in the U.S. and surging Chinese factory gate prices indicate that this isn't just a Eurozone story.
Friday's detailed October CPI report in Germany confirmed that inflation pressures are steadily rising. Inflation rose to 0.8% year-over-year in October, from 0.7% in September, lifted mostly by a continuing increase in energy prices.
As expected, the ECB made no changes to its policy stance today. The refi and deposit rates were left at 0.00% and -0.4%, respectively, and the pace of purchases under QE was maintained at €30B per month.
The PBoC has let up on its open-market operations after allowing bond yields to move higher again in October.
The gap between U.K. and U.S. government bond yields has continued to grow this year and is approaching a record.
Bond yields in Italy remain elevated, but volatility has declined recently; two-year yields have halved to 0.7% and 10-year yields have dipped below 3%.
Italian bond yields have remained elevated this week, following the release of the government's detailed draft budget for 2019.
Bond yields in the Eurozone took another leg lower yesterday.
We tend to keep a close eye on monetary policy initiatives in Japan, as the BOJ's fight to spur inflation in a rapidly ageing economy resembles the challenge faced by the ECB.
The ECB conformed to expectations today, at least on a headline level.
German 10-year yields have been trading according to a simple rule of thumb since 2017, namely, anything around 0.6% has been a buy, and 0.2%, or below, has been a sell.
The Chancellor's Autumn Statement dashed hopes that the fiscal consolidation will be paused while the economy struggles to adjust to the implications of Brexit. Admittedly, Mr. Hammond has another opportunity in the Spring Budget to reduce next year's fiscal tightening.
The Prime Minister's refusal last week to reaffirm her party's 2015 election pledge not to raise income tax, National Insurance or VAT has fuelled speculation that taxes will rise if the Conservatives are re-elected on June 8. Admittedly, Mrs. May asserted that her party "believes in lower taxes", and the tax pledge s till might appear in the Conservatives' manifesto, which won't be published for a few weeks.
Last month, the ECB set the scene for the majority of its key policy decisions over the next 12 months.
The Bank of Japan's biannual Financial System Report was published earlier this week.
The Monetary Policy Board of the Bank of Korea is likely to keep its benchmark base rate unchanged, at 1.25%, at its meeting this week.
The Eurozone's external surplus rebounded over the summer, reversing its sharp decline at the start of Q3.
Financial markets in the Eurozone will be pushed around by global events today. The Bank of Japan kicks off the party in the early hours CET, and the spectrum of investors' expectations is wide.
German survey data did something out of character yesterday; they fell. The IFO business climate index declined to 117.2 in December from a revised 117.6 in November.
Inflation in the Eurozone eased at the start of Q3.
The EZ's current account surplus is solid as ever, despite falling slightly in February to €35.1B, from an upwardly-revised €39.0B in January.
This year has been sobering for Eurozone equity investors.
Economists refer to two different types of forward rate guidance by central banks: Delphic and Odyssean. The former describes a "normal" situation, in which the central bank follows a transparent rate-setting rule allowing markets to forecast what it will do, based on the flow of economic data.
The stakes in the Brexit saga have been raised significantly over the summer.
Today is a busy day in the Eurozone economic calendar, but we suspect that markets mainly will focus on the details of Italy's 2019 budget.
The ECB held fire yesterday. The central bank kept its main refinancing rate unchanged at 0.0%, and also maintained the deposit and marginal lending facility rates at -0.4% and 0.25% respectively.
The EU Commission and Italy's government remain at loggerheads over the country's fiscal plans next year.
We have to hand it to Italy's politicians. In an economy with a current account surplus of 3% of GDP, a nearly balanced net foreign asset position and with the majority of government debt held by domestic investors, the leading parties have managed to prompt markets to flatten the yield curve via a jump in shortterm interest rates.
As we showed in yesterday's Monitor--see here--EZ governments and the ECB have thrown caution to the wind in their efforts to limit the pain from the Covid-19 crisis.
Data yesterday showed that German inflation roared higher at the start of the year, but the devil is in the detail.
Price action in Italian bonds went from hairy to scary yesterday as two-year yields jumped to just under 3.0%.
We have spent the past few weeks shifting our story on the EZ economy from one focused on slowing growth and downside risks to a more balanced outlook. It seems that markets are starting to agree with us.
Survey data in EZ manufacturing remain soft. Yesterday's final PMI report for August confirmed that the index dipped to 54.6 in August, from 55.1 in July, reaching its lowest point since the end of 2016.
If 2017 really is the year of "reflation", somebody forgot to tell the gilt market. Among the G7 group, 10-year yields have fallen only in the U.K. during the last three months, as our first chart shows.
It's probably happening a decade too late, but the EU is now moving in leaps and bounds to restructure the continent's weakest banks. Yesterday, the Monte dei Paschi saga reached an interim conclusion when the Commission agreed to allow the Italian government to take a 70% stake in the ailing lender.
It will take a while for the economic data in the euro area fully to reflect the Covid-19 shock, but the incoming numbers paint an increasingly clear picture of an improving economy going into the outbreak.
The coronavirus outbreak, by definition, will fade eventually, but we suspect the measures to combat it will be more long-lasting. In terms of sheer scale, EZ governments and the ECB are throwing the kitchen sink at the virus, but that's only half the story.
Gilts continued to rally last week, with 10-year yields dropping to their lowest since October 2016, and the gap between two-year and 10-year yields narrowing to the smallest margin since September 2008.
Money supply growth in the Eurozone quickened last month, by 0.3 percentage points to 3.9% year- over-year, but the details were less upbeat.
October's GDP report, released on Monday, might just manage to break through the wall of noise coming from parliament ahead of the key Brexit vote on Tuesday.
The presumption in markets is that the French presidential election is the last hurdle to be overcome in the EZ economy. As long as Marine Le Pen is kept out of l'Élysée, animal spirits will be released in the economy and financial markets. We concede that a Le Pen victory would result in chaos, at least in the short run. Bond spreads would widen, equities would crash and the euro would plummet. But we also suspect that such volatility would be short-lived, similar to the convulsions after Brexit.
Opinion polls suggest that the Italian population will reject Prime Minister Matteo Renzi's constitutional reform on Sunday. Undecided voters could still swing it in favour of Mr. Renzi, but the "No" votes have led the "Yes" votes by a steady margin of about 52% to 48% since October.
Many investors are betting that the MPC will announce a bold package of easing measures on Thursday. For a start, overnight index swap markets are pricing-in a 98% probability that the MPC will cut Bank Rate to 0.25%, and a 30% chance that interest rates will fall to, or below, zero by the end of the year.
Predicting which way markets would move in response to potential general election outcomes has been relatively straightforward in the past. But the usual rules of thumb will not apply when the election results filter through after polling stations close on Thursday evening.
This week's uproar over the ECB's purchases of Italian debt in May--or lack thereof--shows that monetary policy in the euro is never far removed from the political sphere.
The Chancellor indicated yesterday that the current fiscal plans--which set out a 1% of GDP reduction in the structural budget deficit this year--will remain in place until a new Prime Minister is chosen by September 2. So for now, the burden of leaning against the imminent downturn is on the MPC's shoulders.
Final May CPI data in the Eurozone today likely will confirm that inflation pressures edged marginally higher last month. We think inflation increased to -0.1% year-over-year, from -0.2% in April, as a result of slightly higher services inflation, and a reduced drag from falling energy prices.
It would take nothing short of a catastrophe in coming months for the ECB to alter its plan to end QE via a three-month taper between September and December.
Judging by the headline performance metrics, EZ equity investors have little cause for worry.
Today's ECB meeting is supposed to be a slam-dunk.
The EZ government bond market has been in a holding pattern for most of 2017. The euro area 10- year yield--German and French benchmark--is little changed from a year ago, though it is at the lower end of its range.
The escalation in the U.S.-Chinese trade wars has understandably pushed EZ economic data firmly into the background while we have been resting on the beach.
EZ investors remain depressed. The headline Sentix confidence index fell to 12.0 in September, from 14.7 in August, and the expectations gauge slid by three points to -8.8.
The BoJ had two tasks at its meeting yesterday.
In this Monitor we'll let the data be, and try to make some sense of the recent market volatility from a Eurozone perspective, with an eye to the implications for the economy and policymakers' actions.
Donald Trump's victory casts a shadow of political uncertainty over what had appeared to be a decent outlook for the U.S economy. The U.K.'s trade and financial ties with the U.S., however, are small enough to mean that any downturn on the other side of the Atlantic will have little impact on Britain.
The ECB's communication to markets has been clear this year. In Q1, the central bank changed its stance on the economy towards an emphasis on "downside risks to the outlook".
Storm clouds gathered over Eurozone financial markets last week. The sell-off in equities accelerated, pushing the MSCI EU ex-UK to an 11-month low.
Base effects were the key driver of yesterday's upbeat industrial production headline in Italy.
The Covid-19 crisis has turned the tables on the Spanish economy.
The Eurozone's sovereign bond markets are dying, and this is a good thing, by and large.
The ECB disappointed slightly on the big headlines in yesterday's policy announcements, but it delivered shock and awe with the details
LatAm markets reacted relatively well to the Fed's rate hike on Wednesday, which was largely priced-in. The markets' cool-headed reaction bodes well for Latam central banks. But it doesn't mean that the region is risk-free, especially as Mr. Trump's inauguration day draws near.
We look for yet another unanimous vote by the MPC to keep Bank Rate at 0.75% on Thursday, with no new guidance on the near-term outlook.
Yesterday's data showed that growth in the EZ slowed in the second quarter.
The story of U.S. retail sales since last summer is mostly a story about the impact of the hurricanes, Harvey in particular.
German inflation pressures are rising. Yesterday's final September CPI report showed that inflation rose to 0.7% year-over-year, from 0.4% in August, chiefly as a result of continued easing of deflation in energy prices.
Italy is edging closer to a coalition government with the Five-Star Movement, the Northern League, and Forza Italia at the helm.
Today's Sentix survey of Eurozone investor sentiment likely will remain downbeat. We think the headline index rose only trivially, to 6.0 in April from 5.5 in March, and that the expectations index was unchanged at 2.8. Weakness in equities due to global growth fears and negative earnings revisions likely is the key driver of below-par investor sentiment.
Last week's ECB meeting--see here--made it clear that the central bank does not intend to jump the gun on rate hikes next year, even as QE is scheduled to end in Q4 2018.
German 10-year government bond yields jumped at the end of 2016, but have since been locked in a tight range around 0.4%, despite a steady inflow of strong economic data.
Yesterday's ECB press conference confirmed our view that Mr. Draghi is the periphery's friend, not enemy. Crucially, the central bank agreed to increase emergency liquidity assistance--ELA--to Greek banks by €900M. This is consistent tent with the agreement by the Eurogroup to give Greece €7B bridge financing, and shows the ECB is ready to act on the back of only a temporary truce between Greece and the EU. The increase in ELA is modest, and we doubt a painful restructuring of the banking system can be avoided. But with Greek bond yields falling, the available pool of collateral will go up, allowing the central bank to provide further relief in coming weeks.
Gilt yields have risen sharply over the last month, even though the Monetary Policy Committee is just one-third of the way through the £60B bond purchase programme announced in August. Government bond yields in other G7 economies also have increased, but not as much as in Britain.
The renewed decline in bond EZ bond yields has raised the question of whether inflation expectations will recover at all in this cycle. We think they will, and we also believe 10-year yields will rise towards 1%-to-1.2% towards the end of the year. But two factors will keep inflation expectations and yields in check in the near term.
CPI inflation held steady at 2.3% in March, as we and the consensus had expected. Nonetheless, the consumer price figures boosted sterling and bond yields, as the details of the report made it clear that inflation is on a very steep upward path.
Gilt yields have collapsed this year, aided by a surge in safe-haven demand, the much lower outlook for overnight interest rates and the resumption of QE. Bond yields also have fallen globally, but the drop in the ten-year gilt yields to a record low of 0.53%, from nearly 2% at the beginning of 2016, has greatly exceeded the declines elsewhere, as our first chart shows.
In the years before the crash of 2008, if you wanted to know what was likely to happen to the pace of U.S. economic growth, all you needed to know was what happened to corporate bond yields a year earlier. The correlation between movements in BBB industrial yields--not spreads--and the changes in the rate of GDP growth, lagged by a year, was remarkably strong from 1994 through 2008, as our first chart shows. Roughly, a 50 basis point increase in yields could be expected to reduce the pace of year-over-year GDP growth--the second differential, in other words--by about 1.5 percentage points.
It says a lot about investor expectations that markets' reaction to yesterday's policy announcement by the ECB was marked by slight "disappointment," with EURUSD rallying and EZ bond yields rising.
Many investors probably glossed over yesterday's barrage of data in the Eurozone, for fear of being caught out by another swoon in Italian bond yields. Don't worry, we are here to help.
The distortions in European fixed income markets have intensified following the initiation of the ECB's sovereign QE program. In the market for sovereigns, German eight-year bond yields are within a touching distance of falling below zero, and this week Switzerland became the first country ever to issue a 10-year bond with negative yields.
We think that the higher inflation outlook means that the MPC will dash hopes of unconventional stimulus on August 4 and instead will opt only to cut Bank Rate to 0.25%, from 0.50% currently. The minutes of July's MPC meeting show, however, that the MPC is mulling all the options. As a result, it is worth reviewing how a QE programme might be designed and what impact it might have on bond yields.
Last week's QE announcement has made Eurozone inflation prints less important for investors, but the market will still be watching for signs of a turning point in benchmark bond yields. The data are unlikely to challenge bond holders in the short run, however, as the Eurozone probably slipped deeper into deflation in January.
Mr. Draghi's speech yesterday in Portugal, at the ECB forum on Central Banking, pushed the euro and EZ government bond yields higher. The markets' hawkish interpretation was linked to the president's comment that "The threat of deflation is gone and reflationary forces are at play."
The slide in global long-term bond yields, and flattening curves, have spooked markets this year, sparking fears among investors of an impending global economic recession.
Chief U.S. Economist Ian Shepherdson discussing the latest from the Fed
pantheon macroeconomics, pantheon, macroeconomic, macroeconomics, independent analysis, independent macroeconomic research, independent, analysis, research, economic intelligence, economy, economic, economics, economists, , Ian Shepherdson, financial market, macro research, independent macro research