CREDIT OPEN: Assumption Day set to keep issuers away

The positive tone remains intact this morning where EU and US index futures are pointing higher in the wake of a fifth straight gain for the S&P500 and mostly constructive Asian lead.

The latter comes as Nikkei rose in the wake of much stronger than expected Q2 GDP data from Japan while China retail sales data also topped forecasts.

US yields remain tilted to the downside after closing lower on Wednesday following US CPI data where the annual headline rate cooled to 2.9% in July, the lowest rate in over three years. With that, a 25bps cut remains nailed on at the Fed’s September meeting although hopes of a larger move now look rather fanciful given the much calmer mood that has taken hold in recent days to follow the cliff diving seen in markets at the start of the month when a BoJ hike sparked huge volatility.

In any case, more clarity will be forthcoming via key events and data in the next few weeks which include Jackson Hole (22nd Aug), PCE data (30th Aug) and of course the next employment report (6th Sep).

Turning to more immediate matters and this morning's UK data dump indicated another relatively robust quarter of growth in Q2 with the QoQ rate at 0.6% to follow the 0.7% seen in Q1. Industrial production beat forecasts with a solid 0.8% MoM rise in June, above the 0.1% BBG consensus and May’s revised 0.3% print.

Still to come today, US data highlights comprise advance retail sales, jobless claims & industrial production.

Two Fed speakers come in the form of Musalem and Harker. After hours yesterday, the Fed's Goolsbee reiterated that he's becoming more concerned about the labour market while Bostic (via the FT) said that he is open to a September cut.

Elsewhere, the rates complex gets a break from term auction supply while earnings updates come 9 Stoxx600 & 5 S&P500 companies.

For more on latest developments see the European Breakfast Briefing.

Thursday’s supply prospects

Given today marks Assumption Day we expect nothing to come out in the European bond market, which in turn would leave the weekly euro haul at just EUR1bn and the lowest of the year so far. The latest to add to that total was The German Federal State of Mecklenburg-Vorpommern on Wednesday which offered the first euro SSA deal in three-weeks, although struggled for traction. The 9yr LSA was capped at EUR500m no grow from the outset but only landed in line with m/s +17 area guidance (~2bps NIC) on a demand that finished at EUR450m (including 50m JLM interest) and less than the issue amount. Also out Wednesday was SSA peer IFC with a GBP250m Dec 2026 line that saw a GBP450m orderbook.

Two issuers were live in the US Wednesday despite the distraction of inflation data. They brought ex-SSA issuance for the week to USD23.6bn, enough to top the lowest weekly estimate of USD22.5bn, though still shy of the average weekly estimate of USD30bn. For more colour see THE ENDGAME.

What to watch today

** Key Data: US Jul Retail Sales (13:30), US Jul Import Price Index (13:30), US Aug Empire Manufacturing (13:30), US Weekly Continuing/Initial Jobless Claims (13:30), US Jul Industrial Production (14:15), US Jul Capacity Utilization (14:15), US Jun Business Inventories (15:00) and US Aug NAHB Housing Market Index (15:00)

** Key Events: Fed’s Musalem (14:10) and Harker (18:10) speak

** Auctions: No major term auctions scheduled for Thursday 15th August

** Earnings: 9 Stoxx600 & 5 S&P500 companies report

** Holidays: Assumption Day in much of Europe

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.