The European bond market on Friday has been digesting the ECB policy meeting. The rally in European sovereigns resumed, and for the first time in history, Spanish 10-year Bonos closed with a negative yield, adding to the pile of negative-yielding debt which has hit around $18 trillion.
The rally in European sovereigns will continue. Even if Lagarde mentioned that the ECB might not deploy in full the PEPP program, the central bank's economic forecasts painted a difficult few years ahead of the bloc. The economy is going to recover, but slower than expected, and inflation in 2023 is expected to be well below the ECB target rate. Therefore, the ECB will have no other alternative rather than continuing to stimulate the economy. Inevitably, this will push those European rates that remain above positive, below zero.
In the UK, as a hard Brexit looks more and more likely, yields will continue to fall. As per my earlier analysis which you can find here, ten-year Gilts might try the benchmark bank rate at 0.1% in case of a hard Brexit.
Economic calendar:
Monday the 14th of December
- Japan: Industrial Production
- China: Foreign Direct Investment (FDI)
- Eurozone: Industrial Production
Tuesday the 15th of December
- Australia: RBA meeting minutes
- China: National Bureau of Statistics (NBS) press conference, Retail sales
- Switzerland: SECO Economic Forecasts
- United Kingdom: Claimant Count Change, ILO unemployment rate, average earnings
- United States: Industrial Production
- Canada: BOC's Governor Macklem Speech
- Australia: Westpac Leading Index
- Japan: Merchandise Trade Balance
Wednesday the 16th of December
- United Kingdom: Consumer Price Index, Retail Price Index, PPI Core Output, Market Manufacturing PMI, Markit Services PMI, Markit PMI Composite
- France: Markit Manufacturing PMI, Markit Services PMI, Markit PMI Composite
- Germany: Market Manufacturing PMI, Markit Services PMI, Markit PMI Composite
- Eurozone: Market Manufacturing PMI, Markit Services PMI, Markit PMI Composite, Labour Cost
- Canada: BOC Consumer Price index
- United States: Retail Sales, Market Manufacturing PMI, Markit Services PMI, Markit PMI Composite, FOMC Economic Projections, FED Interest Rate Decision, FOMC Press Conference
- Switzerland: Swiss National Bank Quarterly Bulletin'
Thursday the 17th of December
- Australia: Employment Change, Unemployment Rate
- Switzerland: SNB Monetary Policy Assessment, SNB Press Conference
- Eurozone: Consumer Price Index
- United Kingdom: BOE Monetary Policy Committee, BOE Asset Purchase Facility, Bank Of England Minutes
- United States: Initial Jobless claims, Covid-19 Vaccine Announcement
- Japan: National Consumer Price Index
Friday the 18th of December
- United Kingdom: GFK Consumer Confidence, Retail Sales, Current Account
- Japan: BOJ Monetary Policy Statement, BOJ Press Conference
- Germany: Producer Price Index, IFO Business Climate
- Canada: Retails Sales