Asset liability matching demand from pension funds will support the longer end and assuming the ECB hikes rates aggressively, we might see a flat yield curve by April. |
Assume that a time machine is beaming you back to Monday morning. You start the week with the impression of an unexpectedly strong 274k US payroll report in mind. In addition, a clairvoyant tells you that: 1) US retail sales surged by 1.4% m-o-m in April, 2) German growth advanced by 4% q-o-q annualized in Q1 2005, 3) speculation about a revaluation of the Renminbi will intensify, 4) the oil price will fall by about USD 3.50 per barrel this week, 5) and the US Treasury will sell USD 51 bn in Treasury Notes. You make up your mind and conclude that in this environment yields need to go up. At least 99 out of 100 market participants with the same information would have shared your view. But reality is different. Yields are down and down and down again. These are Schwarzenegger markets, no one can beat them. |
In all likelihood, disappointing data will at some point in time dampen rate hike expectations. There's a reasonably good chance for yields to move substantially lower over the course of this year. |
In all likelihood, the time when obscure statements [from FED Chairman Alan Greenspan] caused analysts to ponder about the message between the lines will be over as Bernanke is expected to increase transparency by choosing clear-cut language -- more transparency, but less fun. |
In the near term, the gilt market will react to any economic data release that helps shape investors' BOE view. The annual growth figure was lower than expected, showing continuation of declining growth. |
In the near term, the gilt market will react to any economic data release that helps shape investors' BOE view. The annual growth figure was lower than expected, showing continuation of declining growth. |
It's becoming harder to believe that the ECB will only raises rates once with confidence high and policy makers sounding hawkish. The short end of the bond market will remain under pressure. |
It's yet more bad news for GM and we can't rule out the possibility of even worse to come. Given the big sell-off we've had in Treasuries, this is a good time to buy. |
The central bank is very likely to send a stronger message that rates are going up in the near future, because the economic outlook is getting brighter. This will put downward pressure on the bond market. |
The ECB has signaled that if there was any risk inflation expectations would run away, they would contain them. With this central bank rate-hike cycle, it may lead to a flat yield curve by April. |
The Fed will definitely be raising the rate at the end of this month, and it's certainly possible we'll get a second rate increase later. With some supply pressure, that will also lead to higher yields. |
The market is under pressure at the moment, there's no question about that. This means yields at the long end will rise. |
The substantial upward revisions of the staff forecasts imply more rate hikes to come. The market is absolutely right to price in a June rate hike. |
The ZEW indicator is at levels which previously have marked a high, and discussion will now start on whether the ECB will hike rates earlier than in March. This will put the front-end under pressure. |
These somewhat disappointing figures might remind investors that not everything is bright in the euro zone. The long end has seen its yield highs. |