Fixed income market: the week ahead Fixed income market: the week ahead Fixed income market: the week ahead

Fixed income market: the week ahead

Bonds
Althea Spinozzi

Head of Fixed Income Strategy

Summary:  Prepare for a slow week ahead. US Treasury auctions will be dictating sentiment in the bond market as a record $176 billion will be issued today and tomorrow in 2-, 5- and 7- year bonds. In Europe, the focus will be on the Brexit deal that will push Gilt yields higher to test their resistance line at 0.45% if approved.


We don’t expect much noise in the market this week as many are still recovering from last week’s Christmas festivities.

Yet, the US Treasury is on the way to issue a record $176 billion bonds with 2-, 5- and 7-year maturities between today and tomorrow. Thus, it continues to be crucial to monitor 10-year Treasury yields and their ascent towards the 1% pivotal level. Now that President Trump has signed a stimulus bill, the only other element missing to see higher yields is the January 5th Georgia Senate runoff. Suppose Democrats secure both senate seats, thus gain control of Congress. In that case, there could be scope to unleash more fiscal stimulus to support the economic recovery, ultimately pushing yields above the 1% level.

Image 1: 10-year Treasury yields. Source: Bloomberg.

The UK Parliament vote on Brexit this Wednesday will be impossible not to follow even though many will be preparing for New Year celebrations. On Friday, ten-year Gilt yields closed around nine basis points higher from opening at 0.28% as the UK and Europe found common grounds for a Brexit deal. Suppose everything goes smoothly and there are no surprises in approving the deal. In that case, we can expect Gilt yields to continue to move higher and even to test their 0.45% resistance line.

Image 2: 10-year Gilt yields. Source: Bloomberg.

Let’s not forget that this is a special week because as of yesterday, vaccinations against Covid-19 have started in Europe too. Positive news might give a push to the European stock market and slow down European sovereigns’ rally.

Economic Calendar

Monday, December 28th

  • United States: 3-Months Bill Auction, 6-Months Bill Auction, 2-Year Note Auction, 5-Year Note Auction, CFTC Net Position for Gold, Oil and S&P 500.
  • United Kingdom: CFTC GBP NC Net Positions
  • Japan: CFTC JPY NC Net Positions
  • Eurozone: CFTC EUR NC Net Positions
  • Australia: CFTC AUD NC Net Positions

Tuesday, December 29th

  • United States: Redbook Index, S&P/Case-Shiller Home Price Indices, 7-year Note Auction

    Wednesday, December 30th

  • Germany: EUR Retail Sales
  • Switzerland: KOF Leading Indicator, ZEW Survey
  • United States: Chicago Purchasing Managers' Index, Pending Home Sales
  • United Kingdom: UK Parliamentary Vote on Brexit

Thursday, December 31st

  • China: Non-Manufacturing PMI
  • United States: Continuing and Initial Jobless Claims

Friday, January 1st – New Year's Day

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank (Schweiz) AG
The Circle 38
CH-8058
Zürich-Flughafen
Switzerland

Contact Saxo

Select region

Switzerland
Switzerland

All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law.

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.