CREDIT OPEN: Next batch line up as inflation data and earnings take centre stage
EU stocks look set for a mildly constructive start to Wednesday’s session as EU equity markets continue to monitor developments in the adjacent asset classes, notably the government debt complex where the ongoing rise in yields remains front and centre in terms of concerns.
Over in the US, the S&P500 (+0.11%) eked out a minor gain but Nasdaq (-0.23%) lost ground for a fifth straight day as concerns over tech valuations continue to swirl in a rising rate environment although US yields have moderated a touch overnight.
This time yesterday, with help from reports that incoming President Trump’s team were considering a gradual ramping up of tariffs, it had looked like a battered EGB complex was set to catch a break following a string of losses.
However, it wasn’t to be with the 10yr German yield closing another 3.8bps higher at a new 7-month high of 2.65%. Bears now target the peak seen last May at 2.70%, beyond which thoughts could ultimately turn to the peak in Oct 2023 above 3.0%, hardly a comforting thought for those worried that higher yields could upset the apple cart in the equity complex.
What transpires today will, of course, be heavily dependent on the outcome of the pivotal US CPI report for Dec, ahead of which we get earnings updates from four of the “big six” US banks.
UK inflation metrics due shortly will set the tone into another supply test for UK debt markets where GBP4bn 10yr gilts are up for auction, following which Germany will offer ultra-long 2053 & 2054 Bunds.
Elsewhere, it’s another relatively busy session for central bank rhetoric. Speaking during the Asian session, ECB’s Lane said that the European economy is continuing to recover while officials need to see another phase of disinflation in 2025.
For more on latest developments see the European Breakfast Briefing.
Wednesday’s expected supply
Coming into the midweek session and the weekly single currency haul stands at EUR36.8bn, slightly more than half the average estimate of EUR72bn given in our weekly estimates report. Another batch of issuers across the asset classes are already sat in the pipeline set to add to that (details below), whilst we expect more opportunistic supply to come our way. Offering encouragement to the latest batch, orders for Tuesday’s EUR26.75bn of euro paper peaked at an eye-catching EUR280.69bn (full recap here).
** State of Baden-Wuerttemberg EUR1bn no grow 15yr LSA
** KommuneKredit EUR Mar 2033s
** Motability Operations Group EUR 8yr/12yr & GBP 20yr social three-part
** Inmobiliaria Colonial EUR500m (exp) 5yr green
** Ipsos EUR400m no grow 5yr
** SEA SpA EUR300m no grow 7yr
** Sixt EUR500m no grow 5yr
** Sirius Real Estate EUR300 (exp) 7yr
** Bausparkasse Schwaebisch Hall EUR500m no grow 6yr covered
** KEB Hana Bank EUR 3-4yr sustainability covered
** Credit Agricole Public Sector EUR500m no grow 4.5yr Obligation Foncieres
** SALT EUR300m (min) 5NC2 SSN
Volatility in the broader markets has little effect on US high-grade primary activity, though we were limited to just a half-dozen ex-SSA offerings Tuesday which raised USD5.55bn and brought ex-SSA issuance for the week to USD17.25bn, as everyone eagerly waits to see what the “big six” banks do after reporting earnings from today. For more colour see THE ENDGAME.
What to watch today
** Key Data: UK Dec CPI/RPI/PPI (07:00), FR Dec F CPI (07:45), SP Dec F CPI (08:00), GE 2024 GDP (09:00), EC Nov Industrial Production (10:00), US Weekly MBA Mortgage Applications (12:00) and US Dec CPI (13:30)
** Key Events: Guindos (08:00), Villeroy (08:30) & Vujcic (08:35), Fed’s Barkin (14:20), Kashkari (15:00), Williams (16:00) & Goolsbee (17:00) and BoE’s Taylor (16:30) all speak. Fed releases Beige Book (19:00)
** Auctions: UK to sell GBP4bn 2034 Gilts (10:00) and GE to sell EUR2.5bn 2053 & 2054 Bunds (10:30)
** Earnings: 6 S&P500 companies release results, including Citigroup, Goldman Sachs, JPMorgan & Wells Fargo
All times GMT
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