European Bond Market Preview 3/29

- European governments closed lower in yesterday’s session despite weaker than expected durable goods orders in the US as investors speculation on further ECB interest rate hikes after yesterday’s M3 data reached a new 17-year high.
- The ECB’s Trichet reiterated yesterday that the ECB sees inflation risks on the upside, noting that M3 growth is dynamic. Trichet reiterated that rates are on the accommodative side, that rates are low, and said that monetary growth is vigorous.
- The ECB’s Weber said yesterday that oil and wages could amplify inflation risks. Weber also said that money-supply poses an inflation risk.
- According to the French newspaper Les Echos the French unemployment rate fell to 8.4% in February from 8.6% in January. If confirmed this would be the lowest unemployment rate since September of 1983. Analysts saw the French unemployment rate falling to 8.5%.
- Germany sold €5.0B in 4.00% S150 Bobl with an average yield of 3.97% and a bid to cover of 2.4. The bid-to-cover was above the neutral call of 2.2, and was the highest since mid-2005.
- In focus today will be German unemployment data for the month of February due out at 3:55 ET. The German unemployment rate is expected to fall to 9.2% in February from 9.3% in January, while the jobless change is expected at –47K. Additional focus will fall on comments from the ECB’s Trichet who is scheduled to speak at 8:00 ET.
- In new supply the Italian treasury will be selling €3.0B 3-Year 4.0% Bonds, €2.0B 7-Year Floating Rate Notes and €2.5B 10-Year 4.0% Bonds. Results for all auctions are expected just after 5:00 ET.
- Gilts closed right around the unchanged level yesterday outperforming the EGBs after fourth-quarter GDP was revised down to 0.7% q/q from the preliminary reading of 0.8%.
- In focus today will be the release of Final M4 money supply data for the month of February, as well as net consumer credit, net lending, and mortgage approvals, all of which are scheduled for release at 4:30 ET.
- In Asian trading US Treasuries are modestly higher, but within narrow trading ranges, gaining some slight upside from dip-buying by Asian real money accounts.