Fixed Income Markets: The Week Ahead
Senior 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.
Latest Market Insights
Quarterly Outlook Q3 2022: The Runaway Train
- Winter is coming to the financial markets as central banks are tightening their grip. How spring will look is still a question.
European energy crisis: it will get worse before it gets betterThe winter in Europe will be tough, but whether the result is political chaos or sustainable, innovative solutions is still undecided.
A difficult and volatile quarter awaitsAs the year draws to an end, commodities continue to be at centre stage of the world with growth pockets political uncertainty.
The bright side: crises drive innovationThe positive spin on crises is that they come with solutions. It is worrisome that deglobalisation may be a response to this crisis.
Green transformation in China: renewable energy and beyondGoing green, China needs to span numerous energy sources to ensure stability, as every source comes with a challenge.
Asia: Intermittent solutions, but a faster renewable adoption curveAsian energy supply is being squeezed. This and the adoption of renewables may change the investment sentiment in the region.
FX: A Fed thaw needed to deliver a sustained USD turn lowerThe US Dollar can keep momentum when the Federal Reserve continues to tighten, leaving the rest to play to their drum.
Autumn can become ugly for equities and bond holders. Comfort for Dollar longsTechnical analysis suggests that equities could face a tough Q4 as could fixed income. US Dollar positions could provide some upside.
The next stock market sector to watch, with stocks going nuclearAs the world scrambles to find affordable, sustainable energy, nuclear is getting attention from politicians and investors alike.
The crypto space is getting cold when the hype disappearsCryptocurrencies face a winter of their own as retail investors and governments are asking tough questions.