CREDIT OPEN: Primary prospects limited as key events loom
EU stocks look set for a subdued start to the event-heavy week as the dust also settles on Friday’s whippy session where US yields fleetingly dipped on the weak NFP print before rapidly reversing course to take the 10yr yield 10bps higher on the day to a fresh YTD peak of 4.38%.
Following that, there was no cash trading in Asia today given the Japanese holiday but US debt futures have rebounded from Friday’s lows, partly chalked up to weekend polls which have given team Harris a lift, albeit in the context that the outcome remains too close to call. In the energy complex, oil is up after OPEC+ agreed to delay an output hike.
Otherwise to note, US index futures suggest Friday’s Wall Street rally will extend which came as well-received earnings updates from Intel and Amazon put a bid into tech, more than outweighing any concerns aligned to the soft NFP print that was attributed to impacts from strikes and hurricanes.
Today delivers little in the way of data to move the needle where final euro-area manufacturing PMI data for Oct is likely to keep attention on the diverging fortunes between Germany and parts of the periphery while EC Sentix Investor Confidence is expected to improve for a second month in Nov.
Auction supply comes from the EU (up to EUR5bn 2029 & 2034 Bonds) and US (USD58bn 3yr Notes).
Ahead of Thursday's FOMC verdict, markets (via CME data) are currently ascribing a 99.9% probability that the Fed will cut by 25bps.
For more on latest developments see the European Breakfast Briefing.
Monday’s supply prospects
Given the distraction of key risk events this week, expectations for any meaningful euro primary bond supply over the next few sessions are extremely low. The main attraction is, of course, Tuesday’s US presidential election, whilst there is also an FOMC verdict due Thursday and another slew of corporate earnings to be watched as 101 Stoxx600 and 102 S&P500 members report. Given all that, Monday looks like the main supply window at this stage to launch a new deal, but we could see some issuance attempts on Thursday if there is a clear US presidential winner by Wednesday, but whether that happens and/or the result is accepted by all looks quite unlikely. In terms of how just much supply we could see, an average combined estimate of just EUR5.5bn was put forward for this week’s euro issuance (ex-HY) by participants in our weekly issuance poll.
Stateside, the Street is looking for, on average, a rather anaemic USD4bn to cross the tape in the US this week due to the election and FOMC interruptions. The lowest guess came in at USD2bn, while the most optimistic of our poll respondents thinks there's a possibility of as much as USD7.5bn pricing. Issuance during the past six presidential election weeks has averaged USD11.5bn. See the IG WEEKLY WRAP UP.
What to watch today (and for the week)
** Key Data: SP Oct HCOB Manufacturing PMI (08:15), IT Oct HCOB Manufacturing PMI (08:45), FR Oct F HCOB Manufacturing PMI (08:50), GE Oct F HCOB Manufacturing PMI (08:55), EC Oct F HCOB Manufacturing PMI (09:00), EC Nov Sentix Investor Confidence (09:30) and US Sep Factory Orders (15:00)
** Key events/speakers: ECB’s Holzmann speaks (13:00)
** Auctions: EU to sell up to EUR5bn 2029 & 2034 Bonds (10:30), US to sell USD58bn 3yr Notes (18:00)
** Earnings: 1 S&P500 & 20 S&P500 companies report
** Holidays: Japan Culture Day
** Viewpoint - The week ahead:
- Two key US events - the election (Tues) and the FOMC meeting (Thurs) with a 25bp cut priced in
- Other rate decisions include BOE and Riksbank (both likely to cut) and RBA and Norges Bank (both expected to remain unchanged)
- German factory orders (Wed) and Industrial Production (Thurs) along with various European PMI's, PPI and retail sales
- Canada jobs report (Fri)
- China trade data (Thurs)
All times GMT
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