CREDIT OPEN: All eyes on US CPI
Overnight Asian stocks have shown increasing weakness with Nikkei slumping around 1.6% and still sinking at the time of writing. The US equity market had fared slightly better led higher by Nasdaq (+0.84%) and S&P500 (+0.45%) but futures are now trading weaker as we approach the European session.
Focus appears to be heavily centred on the current elephant in the room which comes in the guise of the latest US CPI figure. Forecasters have the expected level pinned at 2.5%, which would be a welcomed, and significant, fall from the July figure of 2.9%. A weaker print could feasibly bring a 50bp rate cut back onto the table before the US presidential election (Nov 5th) with many market participants already concerned that the Fed may have waited too long to start a rate cutting cycle.
UK data due this morning (07:00) is duly centred around GDP (for July). The monthly print is widely anticipated to come out expanding at a modest 0.2% MoM, which would be a slight cooling after activities expanded at an average quarterly pace of 0.6% during the first half of 2024.
There are three major 'sources' of auction supply with the UK (GBP3.75bn), Germany (EUR4.5bn) and US (USD39bn) all slated to provide new paper at the 10yr tenor.
Note that there is no central bank-speak scheduled for today.
For more on latest developments see the European Breakfast Briefing.
Wednesday’s supply prospects
The single currency bond market saw its fourth largest daily volume total of 2024 on Tuesday as issuers continued to front-load ahead of the upcoming key risk events. The final haul came in at EUR31.425bn, boosted significantly by SSA heavyweights The European Union and Republic of Italy which between them raised a jumbo EUR18bn via deals that were swamped with orders (over a quarter of a trillion at final count!). The overall weekly euro total is now at EUR35.425bn and already beyond the average estimate of EUR34bn given by participants in our issuance poll. We look set to creep closer to the highest average guess of EUR45.5bn today too, given several names are still sat in the pipeline with potential pre-ECB offerings.
** 3CIF EUR500m n/g Jan 2028s
** Societe des grands projets EUR May 2045 green
** Munich EUR250m debut green
** Haleon EUR 4yr & GBP 9yr dual-tranche
** MTU Aero Engines EUR 7yr
** Yorkshire Water GBP long 10yr secured sustainability
** Mediocredito Centrale EUR300m 5yr snr pref social
** Co-op Bank GBP200m 4NC3 green senior
While it might not have been 20 or 25 issuers, the 10 borrowers that did tap the USD market Tuesday, did so with a vengeance as they pushed through their deals before today’s CPI report. In doing so, they raised USD16.025bn, bringing ex-SSA issuance for the week to USD23.125bn, bumping up against the lowest weekly estimate of USD25bn. For more colour, see THE ENDGAME.
What to watch Wednesday – US CPI
** Key Data: UK Jul Monthly GDP (07:00), UK Jul Industrial/Manufacturing Production (07:00), UK Jul Trade Balance (07:00), US Weekly MBA Mortgage Applications (12:00) and US Aug CPI (13:30)
** Key Events: EIA Crude Oil Inventory Report (15:30)
** Auctions: UK to sell GBP3.75bn 2034 Gilts (10:00), GE to sell EUR4.5bn of 2034 Bunds (10:30) and US to sell USD39bn 10yr Notes (18:00)
All times BST
---- Subscribe to read more ----
To receive this analysis plus much more, subscribe to IGM. Request your free trial of the service today.