Fixed Income Markets: The Week Ahead

Bonds

Althea Spinozzi

Fixed Income Strategist

This week we expect market sentiment to depend on news concerning President Trump's health and progress regarding the fiscal stimulus package. The main questions are: (1) will Trump be able to run the presidential campaign? (2) will the stimulus package be agreed upon or there might be further delays?

Investors will most likely not want to take a strong market position as it is not clear if the President's symptoms will become more severe. On Friday, the CFTC Commitment of Traders showed that traders' short position in bond futures is the biggest ever on record. Ultra and long maturities were the most sold, indicating that the market expects a fast bear steepener. This sentiment can translate in lower participation in this week's 30-year treasury auction.

We have a week rich of federal reserve speeches and government bond auctions where the US government will look to sell 3, 10 and 30 year Treasuries. It will be crucial to monitor whether treasuries demand softens up as bearish sentiment can leak to the corporate bond space hindering the pipeline in the primary market.

In Europe, investors will try to wrap their head around weaker than expected consumer prices which were released last week. If the ECB decides to increase stimulus, we might see sovereigns prices rising fast. The country that will most likely benefit from it, it's Italy as more aid is necessary to fight long term deflation.

5th of October

  • Eurozone: Markit composite PMI; investor confidence; retail sales
  • United Kingdom: official reserves changes; Markit services and composite PMI
  • USA: Services PMI; ISM nonmanufacturing; Chicago Fed President Charles Evans; Atlanta Fed President Raphael Bostic

 6th of October

  • Eurozone: ECB President Lagarde speaks
  •  UK government auction: to sell GBP 2bn of 2049 bonds
  • Germany government auction: to sell EUR 500 mil of 2030 linkers
  • USA: JOLTS; Jerome Powell speaks at National Association for Business Economics
  • USA government auction: to sell USD 52bn 3-year notes

 7th of October

  • Eurozone: ECB President Lagarde speaks in Paris
  • United Kingdom: house price index; unit labor costs; output per hour.
  • UK government auctions: to sell GBP 2.5bm of 2030 bonds; to sell GBP 750mil of 2041 linkers
  • USA: Fed minutes; Consumer Credit. Several Fed’s speaker from Atlanta, New York, Boston, Chigago and Minneapolis.
  • USA government auction: to sell USD 35bn 10-year notes reopening.

 8th of October:

  • USA Initial jobless Claims.
  • USA government auction: to sell USD 23bn of 30-year bonds reopening.

9th of October

  • United Kingdom: GDP figures; industrial production.
  • USA: wholesale trade.
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