Better than expected Empire manufacturing & an impressive performance from the European equity indices saw bonds make new lows on the week yesterday.
The shortend still a touch weak keeping pace with 10s in the down move. Higher fix than expected yesterday, banks are paying back larger quantities of the LTRO so we are witnessing a draining of the excess liquidity. This is weighing heavily on the Short end. It was the 17th of Jan last year that witnessed quite a huge sell off in Euribor from a similar concern. Mustn't fear! ECB members are not shy in reminding us that they have tools at their disposal to ensure we do not get an explosion of short rates. Problem is, if they come in the form of new a LTRO/MRO type thing the conditions for acceptance may be too prohibitive for those that need it.
Well a data splattered Thursday and with my waters muddied, I'm maintaining a small and changeable approach to the markets again....Probably for the rest of the month TBH.
tya
I expect the Bunds to come in largely unchanged from last nights close. Lower high & lower low puts the momentum to the downside although we did have a nice bounce from the 37/40 level back into mid range. Which only goes to serve my lack of any real directional certainty.
€ curve still bumbling along the bottom of its range despite the small turn down in tens. Mainly thanks to the stuff highlighted above I think. No fireworks from the Bobl auction.
Good luck
Lee
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