CREDIT OPEN: Window wide open after the Fed?
EU stocks are set for a hefty opening upside jolt this morning as they take their cue from sharp gains in US index futures to follow a volatile session for Wall Street stocks which ultimately closed in the red to follow the Fed’s latest verdict.
The employment side of the Fed’s mandate evidently held greater sway at its September meeting judging by the decision to deliver an outsized 50bps cut. Only one member (Bowman) dissented by calling for a smaller 25bps reduction. The jumbo cut came with a reassuring message from Chair Powell that “the US economy is in a good place and our decision today is designed to keep it there”.
Highlighting the degree of uncertainty over the Fed's intentions, just ahead of the announcement, the implied probability (via CME data) of a 50bps move had ebbed to around 55%.
For more insight see Fed - Key Takeaways - Fed cuts 50 as focus shifts to weakening jobs market.
Attention now turns to today’s BoE verdict where the bank is widely expected to hold rates steady at 5% following its 25bps reduction at last month’s meeting.
On the data front, there are no top-tier data releases on tap in Europe this morning while later from the US comes the usual round of weekly jobless claims figures along with existing home sales data for August.
Hefty auction supply is on offer from France and Spain, the reception for which could be enhanced by the last-minute concession injected by Wednesday’s rise in yields.
Aside from the BoE, there are also rate decisions from Norway & Turkey while four ECB members take to the airwaves over the course of the day.
For more on latest developments see the European Breakfast Briefing.
Thursday’s supply prospects
With risk markets set to open on a positive note and the FOMC now in the rear-view mirror, the issuance window looks wide open for potential euro issuance on Thursday. We will be relying heavily on opportunistic issuance to drive activity though with just a handful of names left in the pipeline (below) after a fairly active first half of the week that produced EUR17.65bn in overall euro supply. EUR15.35bn has come via IG issuers, meaning we are still a way short of the average EUR24bn estimate given by participants in our weekly issuance poll.
** Gemeinsame NRW Kommunen EUR 9yr sub-benchmark bond (Staedteanleihe No. 8)
** Spar Nord Bank inaugural EUR250m (exp) 6nc5 green senior non-preferred
** CEME EUR360m 7NC1 secured FRN
US high grade corporate issuance came to a standstill Wednesday as corporate issuers deferred to the Fed and its decision on interest rates, resulting in the seventeenth “zero” ex-SSA issuance day of the year – there were 32 such days all of last year. That left ex-SSA issuance for the week at USD11.6bn, leaving us short of even the lowest weekly estimate of USD15bn. For more colour see THE ENDGAME.
What to watch today – BoE verdict
** Key Data: US Sep Philly Fed Business Outlook (13:30), US Weekly Initial/Continuing Jobless Claims (13:30), US Aug Leading Index (15:00) and US Aug Existing Home Sales (15:00)
** Key Events: BoE Verdict (12:00). ECB’s Knot (08:15), Schnabel (10:00 & 15:40), Panetta (10:00) and Nagel (12:30) speak
** Auctions: SP to sell EUR5-6bn 2028, 2031 & 2043 Bonds (09:30), FR to sell EUR10-12bn 2027, 2038, 2030 & 2032 OATs (09:50) and EUR1.5-2bn 2032, 2040 & 2053 Linkers (10:50). US to sell USD17bn 10yr TIPS (18:00)
** Earnings: 3 Stoxx600 & 4 S&P500 companies report
All times BST
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