European Bond Market Preview 3/15

- European government bonds closed higher in yesterday’s session on renewed worries that weakness I the sub-prime mortgage market in the US may spread to other parts of the economy.
- The ECB’s Trichet said overnight that business cycles have synchronized in the Euro-Area. Trichet said that inflation persistence is the same in the Euro-Area and the US. Furthermore Trichet said that Euro-Area productivity has been disappointing, but pointed out that it may be picking up. Trichet called for responsible wage-setting in the Euro-Area.
- Ahead of the open in the US yesterday the German IHW institute boosted its 2007 GDP forecast to 2.0% from 1.4%. The IHW institute forecasted GDP growth of 2.5% in 2008. The IHW institute expects an ECB rate hike as well as a FED rate cut this summer.
- In focus today will be the release of final CPI data for the month of February in Germany as investors watch for any possible revisions; German CPI is scheduled for release at 3:00 ET. Additional focus will fall upon Euro-Zone CPI data for the month of February. M/M CPI is expected to rise to 0.3% from last months one-year low of –0.5%, while core CPI y/y is expected to rise further from last months one-year high of 1.7%. Euro-Zone CPI is scheduled for release at 6:00 ET.
- Also in focus today will be the release of the ECB’s monthly report for the month of March scheduled for release at 5:00ET. The ECB’s Weber is scheduled to speak in India at 2:00 ET, while the ECB’s Mersch is scheduled to speak in Luxembourg at 11:00.
- In new supply Spain is to sell 3.8% 2017 bonds today, while France is set to sell €4.7B in notes; Results are due at 5:30 ET and 6:00 ET respectively.
- Following the trend, gilts closed higher in yesterday’s session, relatively unaffected by the release of average earnings, and employment data.
- In focus today will be the results of the DMO’s gilt auction. The DMO is set to sell £2.75B in 5.25% Bonds due 2012; results are due just after 5:30 ET. Additional focus will fall on comments from the BOE’s Sentence who is scheduled to deliver a speech at 14:00 ET.