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

Fixed income market: the week ahead

Althea Spinozzi

Head of Fixed Income Strategy

Summary:  In the United States, the rise in Treasury yields might slow down this week if violent protest escalates during the Presidential inauguration. In Europe, a political crisis in Italy, Netherlands, and Estonia may force the European Central Bank to tweak the Pandemic Emergency Purchase Programme (PEPP) favouring certain sovereigns. In our opinion, Italian BTPs continue to offer the most significant upside ahead of Thursday ECB's meeting even if the government is running the risk of earlier elections.

Although it will be a short trading week in the United States, everything can happen as Joe Biden is sworn as President. The reflation story will most likely continue to push Treasury yields higher; however, if violent protest escalates, there could be some upside for Treasuries in the short-term.

In Europe, investors will need to carefully consider opportunities in the European sovereign space before the ECB meeting on Thursday as political hurdles arise in various countries.  The trading week will also be influenced by news from the European financial ministers' meeting and the German and Eurozone ZEW Survey coming out tomorrow.

It will be essential to examine Lagarde's wording at the European Central Bank’s press conference on Thursday as a political crisis unfolds in Italy, Netherlands and Estonia. Although in the last ECB's minutes was mentioned a possible rate cut if the bloc's economic outlook continues to deteriorate, we don't believe that there are yet elements for the ECB to take such a decision. The central bank will most likely maintain its policy on hold and use the Pandemic European Purchase Program to weight purchases towards selective countries to control a spike of spreads against the Bund.

Therefore, we believe that the volatility in Italian sovereigns, which saw the BTP-Bund spread widening in the past week, offers an excellent buying opportunity as the Italian BTPs will continue to be supported by the expansionary monetary policies of the ECB.  Today and tomorrow Italy's Prime Minister Conte will seek to form a new majority in the lower house and the Senate. Suppose he fails to gather enough votes to form a new government. In that case, early elections will be called, which would see the BTPs falling further, representing a greater opportunity for bond investors ahead of the ECB meeting on Thursday.

While the upside in long-term BTPs can be substantial, we believe that such an upside is almost inexistent for Dutch government bonds for the simple reason that they are already trading in deeply negative yield territory. The Dutch 10-year sovereigns (NL0014555419) are offering -0.48% in yield, and the spread between the Netherland government bonds and the Bunds is the tightest since before the Global Financial Crisis in 2008 indicating that there is very little room for further tightening. The spread between Italian BTPs and the Bund, on the contrary, is quoting around 2016 levels. Due to the expansionary accommodative monetary policies of the ECB, the spread between BTPs and the Bund could fall to 75bps, a level previously hit in 2010. If that were the case, it would translate in an upside of approximately 4% and 16% for 10- and 30-year BTPs respectively.

Monday, January 18th

  • United States: Martin Luther King’s Birthday
  • China: Gross Domestic Product, Retails Sales, Industrial Production
  • Japan: Industrial Production
  • Italy: Consumer Price Index
  • Eurozone: Eurogroup Meeting
  • Germany: Deutsche Bundesbank Monthly Report
  • New Zealand: NZIER Business Confidence

Tuesday, January 19th

  • Australia: Housing Industry Association New Home Sales
  • Eurozone: EcoFin Meeting, ECB Bank Lending Survey, ZEW Survey – Economic Sentiment
  • Germany: Harmonized Index of Consumer Prices, ZEW Survey – Economic Sentiment and Current Situation
  • United Kingdom: BOE’s Haldane Speech
  • Australia Westpac Consumer Confidence

Wednesday, January 20th

  • China: PBoC Interest rate Decision
  • United Kingdom: Consumer Price Index, PPI Core Output, Retail Price Index
  • Germany: Producer Price Index, 30-year Bond Auction
  • Eurozone: Consumer Price Index
  • Canada: BOC Consumer Price Index, BOC Rate Statement, Bank of Canada Monetary Policy Report, BOC Interest Rate Decision and Press Conference
  • United States: 20-year Bonds auction
  • Japan: Merchandise Trade Balance

Thursday, January 21st

  • Eurozone: EU Leaders Summit, ECB Interest and Deposit Rate Decision, ECB Monetary Policy Statement and Press Conference, Consumer Confidence
  • Australia: Consumer Inflation Expectations, Employment Change, Unemployment Rate
  • Japan: BOJ Monetary policy Statement, Interest Rate Decision and Press Conference
  • United States:Building Permits, Housing Starts, Initial Jobless Claims, Philadelphia Fed, Manufacturing Survey, 20-year TIPS auction
  • New Zealand: Consumer Price Index
  • Australia: Commonwealth Bank Manufacturing PMI
  • Japan: National Consumer Price index

Friday, January 22nd

  • United Kingdom: GfK Consumer Confidence, Retail Sales Markit Manufacturing and Services PMI
  • Australia: Retail Sales
  • France: Markit Manufacturing, Servicesand PMI Composite
  • Germany: Markit Manufacturing, Servicesand PMI Composite
  • Eurozone: Markit Manufacturing, Servicesand PMI Composite
  • United States: Markit Manufacturing, Servicesand PMI Composite

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 07

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article
  • The rise of populism: Far-right parties will influence the future

    The disheartening cycle of unresolved geopolitical conflicts, the rise of polarizing political parties, and the stagnation of productivity.

    Read article
  • Investing in China: Navigating Q1 amid economic challenges

    Understand China's political landscape in Q4 2023 and the impact on counter-cyclical initiatives, with a focus on the pivotal Q1 2024.

    Read article

The Saxo 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 is not intended to and does not change or expand on this. 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 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 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 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 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 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 (
- Full disclaimer (

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo or its affiliates.

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK Limited (“Saxo”) is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo holds a Type 1 Regulated Activity (Dealing in Securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged Foreign Exchange Trading); Type 4 Regulated Activity (Advising on Securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products may result in your losses exceeding your initial deposits. Saxo does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo does not take into account an individual’s needs, objectives or financial situation. Please click here to view the relevant risk disclosure statements.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

The information or the products and services referred to on this site may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and services offered on this website are not directed at, or intended for distribution to or use by, any person or entity residing in the United States and Japan. Please click here to view our full disclaimer.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc. Android is a trademark of Google Inc.