It’s not a good day for the bond markets, despite the wave of ‘risk-offs’ which has swept through the European stock indices… the fault perhaps of disappointing economic indicators in the Euro zone.
The German Bund of the same maturity shows +4Pts towards 2.365% despite a plunge of -2.1% in the DAX40 and our OATs deteriorate by +6.1Pts towards 3.140% despite the -2.8% of the CAC40 (i.e. -200Pts) .
Further south, Iberian ‘Bonos’ rose by +6 points to 3.114%, Italian BTPs rose by +5.5 points to 3.647%.
The ‘figures of the day’ are not reassuring, neither on inflation (EU CPI), nor on future growth (ZEW): inflation in the euro zone stood at 2% at an annualized rate on the month of October, after +1.7% in September and the gloomy ‘ZEW’ of -5.7Pts in Germany.
The possibility that the ECB accelerates its pace of rate cuts to -50Pts is no longer part of the central scenario given the differences of mind which currently seem to reign within the institution.
And on the growth side, in Germany, the ZEW investor morale index is at half mast, reflecting the impact of the political crisis due to the breakdown of the tripartite coalition that occurred last week.
The ZEW index fell 5.7 points in the November survey compared to the previous month, to stand at +7.4.
‘Economic expectations for Germany have been clouded by Donald Trump’s victory and the collapse of the German coalition government,’ explains ZEW President Achim Wambach, speaking about the survey results.
In addition, assessments of the current economic situation in Germany are also becoming increasingly pessimistic, with the corresponding indicator having fallen by 4.5 points to now stand at -91.4.
The inflation rate in Germany – measured as the change in the consumer price index (CPI) compared to the same month a year earlier – was confirmed by Destatis at 2% for October 2024, compared to 1.6 % the previous month.
No figures in the US but the attraction exerted by stocks and then confidence in fiscal support (less revenue/more deficit) continue to weigh down US T-Bonds.
The ’10 years’ rose by +9 points around 4.441% (+2.2%), the ‘2 years’ by +8.5 points towards 4.338% and the ’30 years’ by almost +9 points – i.e. +2% – towards 4.566%, a zenith (or a ‘worst level’) since July 3 (which propels mortgage rates beyond 7.00%).
The ’10 year’ has seen its yield tighten by +84Pts since mid-September (as if the FED was preparing to raise its rates by 3 times… and a half in 2025).
Finally, British ‘Gilts’ soared by +14.4 points to 4.567% and ‘equalized’ compared to the US ‘3 years’.
All this has been smacking of sulfur for weeks, and especially since last Tuesday: reasons to worry that Wall Street has warded off by setting absolute records since Wednesday 6/11… illustrating the metaphor of markets ‘escalating’ the ‘wall of fear’ (the Wall of Worry).
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