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CREDIT OPEN: Thin pickings seen for primary as ECB takes centre stage

Markets are approaching today's ECB meeting in an ebullient mood where EU and US index futures currently point to further gains for stocks to follow yesterday's tech led move which propelled S&P500 (+1.18%) and Nasdaq (+1.96%) to record highs.

Notably, with markets latching on to the weaker ADP employment data and seemingly discounting the strong ISM services print, the downward move in yields remained intact with the German 10yr yield closing lower for a third day while the US equivalent fell for a fifth straight day, making for a cumulative 33.6bps fall.

Unsurprisingly, bullish sentiment spilled over into Asia today with chipmaker TSMC rising by up to 7.4% to a record high in the wake of Wednesday's surge in Nvidia to a fresh all-time peak.

For today, the ECB takes centre stage where a 25bps reduction in the deposit rate to 3.75% is a foregone conclusion although strong guidance on future cuts looks unlikely given recent unfavourable inflation developments and the mixed rhetoric from ECB officials seen before the quiet period. New economic projections will be key. Ahead of the event, markets are pricing in just over 70bps of cumulative easing from the ECB by year-end.

Given the intense focus on the ECB, today's European data releases may struggle to exert an impact whilst it's a relatively slow day for US data ahead of Friday's key employment report where weekly jobless are seen holding broadly steady.

Auction supply picks up where Spain and France offer up to EUR18.75bn in mostly conventional paper which will provide a timely test of demand at lower yield levels following the multi-day rally seen in the EGB rates complex.

For more on latest developments see the European Breakfast Briefing.

Thursday's supply prospects

IG issuers are expected to stay away from the primary bond market given the distraction of the ECB verdict. However, HY borrower International Personal Finance is set to print a EUR341m 5.5NC2 line after a recent roadshow and add to the EUR31.07bn of euro paper that crossed the tape in the first three days of the week.

** International Personal Finance EUR341m 5.5NC2 at 11% area IPTs

For the seventeenth week this year, syndicate desks around the Street underestimated the resolve of US high-grade corporate borrowers to push their financings across the finish line. In a week that was only supposed to produce on average USD25bn in new ex-SSA debt, a total of 29 borrowers raised USD26.175bn over a three-day span. For more colour see THE ENDGAME.

What to watch today

** Key Data: SP Apr Industrial Production (08:00), GE May HCOB Construction PMI (08:30), IT Apr Retail Sales (09:00), UK May S&P Global Construction PMI (09:30), EC Apr Retail Sales (10:00), US Q1 Nonfarm Productivity (13:30), US Q1 F Unit Labor Costs (13:30), US Apr Trade Balance (13:30) and US Weekly Continuing/Initial Jobless Claims (13:30)

** Key Events: ECB Rate Decision (13:15) and President Lagarde Holds Presser (13:45). BoE Decision Maker Panel survey (09:30)

** Auctions: SP to sell EUR5-6bn 2027, 2031 & 2054 Bonds, as well as EUR250-750m 2039 Linkers (09:30). FR to sell EUR10.5-12bn of 2034, 2038 & 2055 OATs (09:50)