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.

Historical bullets

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.