LOOK AHEAD: Eurozone Timeline of Key Events (Times BST)

Outside of China and Hong Kong, most regional equities are tracking higher, following the strong lead from US markets during Friday's session at the end of last week. US futures started weaker today, but have recovered firmly, with Eminis breaching the 4060 level, before retracing somewhat. The short term technicals are better with the active eminis contract now trading above its 20 and 50-day EMA.

• China/HK stocks have been left somewhat disappointed by the 'around 5%' growth target announced at yesterday's NPC for 2023. It implies less stimulus measures, which the equity market has taken as a negative. The CSI 300 is off by around 0.55%, with property stocks weighing, as the NPC didn't suggest any dramatic shifts in terms of housing policy.
• The HSI is around flat, which is away from worst levels, but is underperforming better trends elsewhere in the region. The prospect of additional curbs on US investment is China is also acting as a headwind.
• Elsewhere the mood is more positive. The Nikkei is at +1.20%, while the Kospi and Taiex are both around +1% higher as well.
• Indian shares are also rallying, up a further 1% as Adani related stocks rose in early trade.
• On the Singapore bourse is down in SEA.

Goldman Sachs note that “the 10s30s swaps curve is closing in on levels seen last October. One common explanation for relative long end outperformance is strong demand from LDI accounts with rising yields.”

• “U.S. corporate defined benefit pensions are in the best financial shape since 2007.”
• “At current rate levels, and with a continued rise in Pension Benefit Guaranty Corporation (PBGC) premiums, sponsors have a strong incentive to either immunise the remaining duration risk in their DB plans or offload them via pension risk transfers. Indeed, elevated stripping activity is suggestive of strong demand from these investors.”
• “We do not expect such flows will be large enough to flatten the curve further, or even sustain current levels for an extended period.”
• “Although both term premium estimates and volatility have increased over the past month, they remain below where they were last October when the 10s30s curve was similarly inverted. Either because term premium will need to rise further if the environment becomes more volatile, or because the current bout of volatility will fade (thereby reducing the convexity benefit at longer maturities), we expect current levels of inversion in the swap curve will reverse.”
• “We therefore recommend fading it (in the swap curve) in a levered format, via 10y/10y20y SOFR curve steepeners. We note that the curve is counter-directional with the level of rates, so a large selloff could produce further inversion.”
• They recommended entry at -84bp, targeting a move to -55bp, with a stop placed at -100bp.