THAILAND: Thailand & Cambodia Reaffirm Efforts Towards Tension De-Escalation
Thailand and Cambodia re-committed to the existing ceasefire agreement as their senior security offi...
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SWAPS: Schatz ASWs To Lowest Level Since Early June
German ASWs extend on yesterday’s move lower as this week’s sell off in outright bonds extends.
- Front end spreads under the most pressure on the day, as Schatz ASWs register the lowest level seen since early June.
- Longer-dated spreads a little more resilient.
- The issuance outlook continues to point to downward pressure for long end spreads over the medium-term, but there are risks to that view, as evidenced by the recent widening and ongoing presence of heightened macro uncertainty.
FOREX: FX OPTION EXPIRY
Of Note:
EURUSD 1.73bn at 1.1700.
USDJPY ~1bn at 146.60.
EURUSD 1.68bn at 1.1700 (wed).
EURUSD 2.16bn at 1.1770 (fri).
- EURUSD: 1.1700 (1.73bn), 1.1725 (343mln), 1.1775 (435mln), 1.1790 (230mln), 1.1810 (710mln).
- USDJPY: 146.60 (949mln).
- AUDUSD: 0.6545 (399mln).
- NZDUSD: 0.6025 (274mln).
SWAPS: ING: No Immediate Jump In Longer-Dated EUR Rates On A Trade Deal
ING write “whilst we see room for longer-dated EUR rates to drift higher upon the signing of a trade deal, the initial market reaction may be limited. The 5y5y real rate shows that markets have remained positioned for an improved long-term economic outlook ever since the German spending announcements. Trump’s trade tantrum thereafter did little to move that pricing. A trade deal should therefore not necessarily warrant an immediate repricing of the back end of the curve”.
- “The transition towards higher rates on the back of the EU spending ambitions will take time, also because investors may remain sceptical about the form and pace of implementation. In any case, the spending plans should reduce the chance of returning to a world of secular stagnation, one in which inflation and policy rates are forced close to zero. So even though we don’t pencil in stellar growth numbers on the back of the fiscal expansion, we do think the 10-Year swap rate can continue to drift higher”.
- “The added bond supply should also push up rates from the back end, a theme we have seen develop in many markets of late. Whilst Germany is in a much better fiscal position, we can expect Bunds yields to feel increased upward pressure in the coming years, especially versus swaps”.
