CREDIT MACRO: Weekly Fund Flows
Mar-15 10:40
- Credit inflows continued in Euro & USD IG/HY - given muted inflows into ETFs we continue to see it driven by conventional/mutual funds. Regardless inflows have been enough this week to support within expectations supply of $37b in $IG (for a change) & above consensus €30m in Euro/Sterling IG/HY (with Friday deals to price as well).
- On £IG; it continued to see outflows for 3rd straight week - again its not evident in secondary spreads (IG/HY -6/-13bps WTD) but we saw signs of it in (certain) primary deals (like high-grade Nestle). £ supply still remains muted - £2.4b in IG is running slower than last 3 years and comes off a very slow February (£2b vs. £8b in Feb last yr).
- Outside of credit, $ govvies saw small outflows while € continued to receive inflows. US equities saw very strong inflows & is continuing recent strength (despite indices trading ~sideways this week) - muted equity flows outside of the US.
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GERMAN AUCTION RESULTS: 30y Bunds
Feb-14 10:36
| 1.80% Aug-53 Bund | 2.50% Aug-54 Bund | |
| ISIN | DE0001102614 | DE000BU2D004 |
| Allotted | E805mln | E852mln |
| Previous | E0.862bln | E5.000bln (synd) |
| Avg yield | 2.53% | 2.53% |
| Previous | 2.45% | 2.537% |
| Bid-to-offer | 2.27x | 3.10x |
| Previous | 2.13x | |
| Bid-to-cover | 2.82x | 3.64x |
| Previous | 2.47x | |
| Avg price | 84.96 | 99.34 |
| Low price | 84.96 | 99.34 |
| Pre-auction mid | 84.812 | 99.146 |
| Prev avg price | 86.510 | 99.196 |
| Prev low price | 86.48 | |
| Prev mid-price | 86.45 | |
| Previous date | 17-Jan-24 | 30-Jan-24 |
| Total sold | E1bln | E1bln |
BONDS: Gilts Outperform As UK CPI Feedthrough Continues To Dominate
Feb-14 10:33
Gilts outperform core/semi-core EGBs this morning following the lower than expected UK CPI print. Gilt futures are +67 ticks at 97.68, while Bunds are +27 at 133.38.
- This morning's UK print is not as soft as it appeared at first glance, with services CPI only just below the BoE's Feb MPR forecasts and driven largely by a downside surprise in the volatile air fares component. Gilts have nonetheless held onto the majority of their initial gains.
- Eurozone preliminary Q4 '23 GDP was in line with the advance reading, while industrial production was stronger than expected (even when excluding Ireland, which contributed +1.4pp to the total 2.6% M/M figure).
- Today's supply slate features EGB issuance from Greece, Germany and Portugal, while the DMO will re-open the Jan-34 Gilt later this morning.
- Cash curves have bull steepened, with Gilt yields unsurprisingly seeing the largest moves lower. 10-year periphery spreads to Bunds are tighter as European equities recover from yesterday's lows. GGB spreads are the exception, trading flat on the day, likely a function of this morning's supply.
- The remainder of today's docket is dominated by central bank speak: BoE Governor Bailey testifies to the House of Lords Economic Affairs Committee today at 1500GMT. For the ECB, Executive Board member Cipollone speaks on the digital Euro at 1400GMT/1500CET. The Bundesbank's Nagel rounds off the day at 1700GMT/1800CET joining a panel discussion on "How will financing work in the future?".
US OUTLOOK/OPINION: Analyst Single Line Takeaways From CPI
Feb-14 10:31
- The 20 analysts below had already jettisoned a March start to rate cuts a while ago. With some questioning January seasonality potentially at least partly behind the surprise strength, they mostly keep to their calls for a first cut in May or June, with a couple already looking for July.
- Nomura formally pushed their view for a first rate cut out from May to June with one less cut for the year with now a FOMC SEP consistent 75bps for 2024.
- The full MNI US Inflation Insight report will follow later on.
