BONDS: EGBs-GILTS CASH CLOSE: Countervailing Factors See Twist Steepening
May-22 16:32
Long-end European bonds remained under pressure Thursday, though yields closed near session lows.
- After gapping higher at the open, yields traded mixed across the curve through the rest of the day. Short-end instruments rallied consistently, with long-end (particularly 30Y) Gilts and Bunds seeing the weakest levels in early afternoon before staging a partial recovery.
- Multiple factors were at play. The short end benefited from dovish ECB repricing after weak flash eurozone Services PMIs.
- Eurozone and UK curves twist steepened however, with longer-dated global yields remaining underpinned by US fiscal concerns as expansive fiscal legislation moved closer to fruition in Washington.
- The twist steepening held by session's cash close in both Germany and the UK, though yields finished near the lows and futures continued to rally after the close.
- The ECB's April meeting accounts noted that "it was argued that the optimal monetary policy response depended on the outcome of tariff negotiations".
- Periphery/semi-core EGB spreads mostly widened in a mixed day for risk assets.
- Friday's calendar highlight is UK retail sales, while we also get German GDP data and French consumer confidence, as well as ana appearance by ECB's Lane.
Closing Yields / 10-Yr EGB Spreads To Germany:
- Germany: The 2-Yr yield is down 4bps at 1.831%, 5-Yr is down 2.1bps at 2.172%, 10-Yr is down 0.3bps at 2.643%, and 30-Yr is up 1.5bps at 3.151%.
- UK: The 2-Yr yield is down 5.2bps at 4.031%, 5-Yr is down 4bps at 4.201%, 10-Yr is down 0.6bps at 4.751%, and 30-Yr is up 3.2bps at 5.55%.
- Italian BTP spread up 1.3bps at 100.9bps / French OAT up 1.3bps at 68bps
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ITALY T-BILL AUCTION PREVIEW: On offer next week
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MEF has announced it will be looking to sell the following at its auction next Monday, April 28:
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US-CHINA: Bessent Says Tariff Standoff With China 'Unsustainable' - Bloomberg
Apr-22 16:29
Bloomberg reporting that US Treasury Secretary Scott Bessent told investors today that "the tariff standoff with China is unsustainable and that he expects the situation to de-escalate."
- According to Bloomberg, "Bessent added that negotiations haven’t started but that a deal is possible..." Bloomberg adds that, "Bessent also said the world’s top two countries essentially have a trade embargo in place..."
- The report comes amid reports that neither US President Donald Trump nor Chinese President Xi Jinping appear willing to take the first step toward initiating high-level trade talks.
- Politico noted this morning: “Trump is insisting on one-on-one talks with [President Xi] — and this has stifled other diplomatic efforts to halt the worsening trade war...” Politico noted on Sunday that Trump's "refusal to allow informal diplomatic outreach to bridge the gap between the White House and Beijing is slowing progress toward a possible deal."
- Meanwhile, China has extended outreach to Japan, South Korea, the EU, and the UK, to bolster trade ties. The Global Times wrote after a call between UK Foreign Minister David Lammy and Chinese Foreign Minister Wang Yi today: "China and the UK share a responsibility to uphold the post-WWII world order."
- Reuters notes that Chinese Premier Li Qiang sent a letter to Japanese Prime Minister Shigeru Ishiba, "calling for a coordinated response to U.S. President Donald Trump's tariff measures..."
- German outlet SZ reports China's leadership wants to lift the sanctions against current and former members of the European Parliament, seen as part of a broader move to drive a wedge between Washington and Brussels ahead of a potential China trip by EU Commission President Ursula von der Leyen later this year.
CARNEY SAYS HE COULD BALANCE BUDGET IN 4-5Y IN STRONG ECONOMY
Apr-22 16:22
- CARNEY SAYS HE COULD BALANCE BUDGET IN 4-5Y IN STRONG ECONOMY
