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Although large negative real yields have become the norm in core Europe, they were less common in the US. Covid-19 changed that. The re-opening should change that back, but so far it hasn't. A big payrolls report followed by a near-4% inflation number next week should tip the balance....
The threat of new trade wars is smaller, but tension hasn’t let up between the US, EU and China. Exporters continue to face higher costs and uncertainty that could weigh on trade growth after this year’s boost from economies opening up. The trade war shocks to the US...
Financial markets are not immune to reopening angst. Fear of overheating and of excessive leverage are factors behind the recent souring in risk aversion. This does not change the macro story, in our view, and PMIs/ISMs today should be a reminder of that. For further details...
The dominant reaction to the yesterday's US ISM data came from real yields. What's not to like about a US ISM reading in excess of 60? Part of the answer is the expected number was even higher (65). Another part reflects demand for fixed income. But yet another represents uncertainty,...
With US GDP already back to where it started pre-Covid, and the Fed still on full easing mode, inflation risks remain elevated. Expectations are braced for this, but the absolute level of rates is not offering much protection. Growing confidence in the eurozone recovery gels with ...
It's clear that the Fed is not for moving away from a super-easy policy setting. This leaves the back end of the curve still quite unprotected from any unexpected inflation. The bond market is listening; US yields rose into the FOMC and came out re-testing lower. We see this as a ...
Trading so far this week has been characterised by a cautious tone that has seen US Treasuries weaken after their early April rally and stock markets retreat from all-time highs. In the case of a less-dovish FOMC, even a pullback in stocks or high yield bond valuations might not preve...
18 percent of companies are expected to experience liquidity-related financial distress and 16 percent are expected to experience insolvency risk. The vast majority of IPOs in 2020-2021 have been SPACs (aka, vehicles for swapping ownership of prior investments, as opposed to generatin...
For financial markets, the acceleration of European vaccination programs and the resilient confidence surveys in the face of tighter restrictions are reason enough to price the start of an economic recovery. For central banks, they are welcome but too tenuous to drive a change of policy. ...
Rates are caught between improving macro conditions, mostly benefitting EUR rates, and greater risk aversion, mostly impacting US rates. The result is large movements but little direction. This morning, interest rates are back where they started the week after significant gyrations in...