HUNGARY: NBH Governor Points to High Levels of Inflation Expectations

Eurozone PPI inflation was as expected in June on a Y/Y basis at 0.6% after 0.3% in May, despite a small miss for the M/M at 0.8% (cons 0.9) after -0.6% M/M - all NSA data. 

• Energy PPI deflation slowed from -1.5% in May to -0.1% Y/Y (highest since March) amid a firm 3.2% M/M jump in the category.
• PPI ex-energy inflation meanwhile eased from 1.1% to 0.9% Y/Y for the lowest rate since November.
• Across the non-energy categories, Y/Y rates were mixed vs May: Non-durable consumer goods at 2.0% (1.9% May), durable consumer goods at 1.5% (1.4% May), and capital goods stayed put at 1.7%. Intermediate goods meanwhile moved into negative territory, at -0.1% Y/Y (0.2% May) for the first time since last November (at least before potential revisions to the data).
• Whilst there recently appears to be only limited impact of disinflationary effects from potential Chinese goods re-routing to Europe under Trump administration trade policy, the further moderation in intermediate goods inflation is worth watching. That said, whilst small parcel taxes have been considered in some countries such as France as a possible anti-dumping measure, we note that industrial prices of consumer goods are still growing more solidly.

• That’s the tightest tail (0.1bp) and highest bid-to-cover ratio (3.33x) the 4.50% Mar-35 Gilt has seen across six re-openings since March.
• Lowest accepted price of 99.823 also well above the 99.7745 pre-auction mid-price.
• The secondary market price of the Gilt has moved up to 99.869 at typing, with Gilt futures also gaining ~14 ticks since the results were published, now -5 ticks today at 92.63.