Today’s 2-year and 5-year US Treasury auctions will be in focus, as ugly-tailing auctions would suggest that the market expects the Federal Reserve to grow even more aggressive. However, the recent bond selloff will allow investors to buy into the highest yields in three years. Therefore, high participation at today's Treasury auctions is more probable, even if we believe there is room for two-year yields to continue to rise.
This week's Federal Reserve speakers, Thursday's February figures on personal income and spending, and Friday's nonfarm payrolls might exacerbate or slow down the rise in yields. If economic data show that inflation continues to rise while the unemployment rate falls, it could build the case for more aggressive monetary policies.
European sovereign yields
European investors will look out for Friday’s eurozone CPI release, which is expected to hit 6.7% in March following a 5.8% reading in February. In the meantime, investors understand that the ECB will unlikely remain accommodative to avoid the same fate of the BOJ. Indeed, by accentuating monetary policies' divergence with the Federal Reserve, the Japanese Yen plunges, welcoming even more inflation.
So far, the market is pricing 50bps ECB rate hikes by the end of the year. Consequently, European sovereign yields continue to rise, with 2-year German yields at -0.14%, rising to 0%, which they didn’t break since 2014.
Economic calendar
Monday, March the 28th
- United States: Goods Trade Balance (Feb) Prel, Wholesale Inventories (Feb) Prel, 3-month, 6-month, 2-year, and 5-year Note auction
Tuesday, March the 29th
- Japan: Jobs / Applicants Ratio (Feb), Unemployment Rate (Feb), BoJ Summary of Opinions
- Australia: Retail Sales (Feb)
- Germany: Gfk Consumer Confidence Survey (Apr)
- United Kingdom: Consumer Credit (Feb), M4 Money Supply (Feb), Mortgage Approval (Feb), BoE Quarterly Bulletin
- United States: Redbook Index (Jan), S&P/Case Shiller Home Price Indices (Jan), 7-year Note Auction
Wednesday, March the 30th
- New Zealand: Building Permits (Feb), ANZ Activity Outlook (Mar), ANZ Business Confidence (Mar)
- Japan: Large Retailer Sales (Feb), Retail Trade (Feb)
- Germany: Import Prices (Feb)
- Spain: Consumer Price Index (Mar) Prel, HICP (Mar) Prel
- Italy: Industrial Sales (Jan), Producer Price Index (Mar), 10-year Bond Auction
- Switzerland: Zew Survey Expectations (Mar), SNB Quarterly Bulletin (Q1)
- United Kingdom: BOE’s Broadbent speech
- Eurozone: Business Climate (Mar), Consumer Confidence (Mar), Economic Sentiment Indicator (Mar)
- Germany: Consumer Price Index (Mar) prel, Harmonized Index of Consumer Prices (Mar) Prel
- United States: ADP Employment Change (Mar), Core Personal Consumption Expenditures (Q4), Gross Domestic Product Annualized (Q4), Personal Consumption Expenditures Prices (Q4)
Thursday, March the 31st
- Japan: Industrial Production (Feb) Prel
- Australia: Building Permits (Feb), Private Sector Credit (Feb)
- China: NBS Manufacturing PMI (Mar)
- United Kingdom: Gross Domestic Product (Q4), Nationwide Housing Prices (Mar)
- Germany: Retail Sales (Feb), Unemployment Rate (Mar)
- Switzerland: Real Retail Sales (Feb)
- France: Consumer Price Index (Mar) Prel, Consumer Spending (Feb), Producer Prices (Feb)
- United States: Core Personal Consumption Expenditures (Feb), Initial Jobless Claims, Personal Income (Feb), Personal Spending (Feb), Fed’s William Speech, Chicago Purchasing Managers’ Index (Mar
- Canada: Gross Domestic Product (Jan)
Friday, April the 1st
- New Zealand: ANZ – Roy Morgan Consumer Confidence (Mar)
- Japan: Tankan Large All Industry Capex (Q1)
- China: Caixin Manufacturing PMI (Mar)
- Spain: Markit Manufacturing PMI (Mar)
- Italy: Markit Manufacturing PMI (Mar)
- France: Markit Manufacturing PMI (Mar)
- Germany: Markit Manufacturing PMI (Mar)
- Eurozone: Markit Manufacturing PMI (Mar), HICP (Mar) Prel
- United Kingdom: Markit Manufacturing PMI (Mar)