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Developed market yield curves are displaying late-cycle dynamics. This is nowhere as obvious as on the GBP curve as hikes are being brought forward, and as the curve flattens. This makes it all the more difficult for long-end rates to rise. For further details see: Rates...
The lower-than-expected CPI pushed US rates back into the driving seat, taking Bunds for a ride. We are also watching hawkish ECB risks that could potentially narrow the UST-Bund spread. We think such tightening is more likely to be temporary and is more inclined to follow the ECB...
In addition to battery element shortages, the chip shortage has limited electric vehicle production. At the auto show in Munich last week, several auto executives commented on the chip shortage. Overall, the electrification of vehicles may be characterized by perpetual shortages for y...
The ECB is looking through higher headline inflation and inflation swaps. We doubt these will be enough to change easing expectations in December, but hawkish comment risks will remain a threat to carry trades. In the US, inflation prints have not affected breakevens much in recen...
The ECB reduced PEPP purchases without causing a hawkish reaction. Its secret? Fanning hopes of more easing in December. We think an acceleration of APP is now the market’s base case, thus putting carry traders in the driving seat. Core rates should tread water from here, u...
We stay tactically overweight European equities with two key events on the horizon: a European Central Bank meeting and the German election. U.S. jobs growth in August was far below expectations. Yet, we caution that seasonality could be at play and a revision upwards is possible. ...
Green issuance remains a hot topic after the summer. This is not only as Germany launches a new 10Y today, but also as the EU prepares its entrance to the market to become a significant player. Supply also looms for USTs today, meaning they could remain in the driving seat a littl...
Despite the lowball jobs total on Friday, plenty of good news is buried in the small print, like massive revisions to the previous two months. In addition, Hurricane Ida may have suppressed reporting of August payroll data. There are some more clues in the ADP reported last Wednesday,...
USD finished last week on a soft note but steadied at the start of the week, edging higher against nearly all major currencies. The Australian and New Zealand dollars were the weakest, off about 0.3%. The JP Morgan Emerging Market Currency Index snapped a six-day rally, its longest in...
We doubt the drivers behind the narrowing of USD-EUR rates differential will persist: supply will swing the other way ahead, and overly hawkish ECB comments sow the seeds of a mini-tantrum. We're at a crossroads on many fronts. Direction usually comes from the US, but not always. ...