DAILY CLOSE: US CPI hits consensus, ECB up next
** The market was as quiet as we had expected on Wednesday, recording the second straight blank for euro investment grade issuance although there were signs of activity in the HY market on the sterling side of the tracks. Virgin Media O2 Vendor Financing Notes V Designated Activity Company brought a GBP400m 7.25NC3 at a price guidance of 8% (+/- 0.125%), with the deal expected to close today. See IGM's Daily Sterling NICs & Books for the latest details on that
** In SSAs newsflow was today dominated by the EU and its outlook for 2025 funding. In its semi-annual presentation, it outlined plans to issue up to EUR90bn in EU Bonds during H1 2025 and approximately EUR160bn for the full year, continuing its robust funding programs. In 2024, the EU raised EUR138bn so the coming year sees somewhat of an acceleration. Last year's additions to NGEU bonds took green issuance to EUR68bn outstanding, making it the fifth-largest global green bond issuer. EUR420bn of the EUR580bn outstanding has been issued under the unified funding approach whilst further measures to enhance market liquidity, like a repurchase facility, were added in 2024. Although borrowing-based programs like NGEU will conclude net issuance by 2026, it is anticipated that refinancing and funding for new policies will sustain the EU's bond market presence. See IGM's SSA SNAPSHOT
** IGM special reports **
** Long-Term FX Forecasts update - The December update & a peek into 2025. Year-to-date, only the Pound outperforms the USD in G10 FX. Since the November 5 US presidential vote and the quick realisation that Trump enjoyed a sweeping victory and a Republican trifecta that will make it easier for him to enact his agenda, only the YEN marginally outperforms the USD. There are plenty reasons why the USD should continue its strength in 2025, not least Trump’s planned major changes in immigration, protectionism via tariffs, lower taxes and deregulation policies. Also, there are few genuine alternatives to the USD among the other G10 currencies. However, history suggests Trump is not necessarily a lasting USD positive and among the obvious current multi-tensions globally we also must try to identify a leftfield fresh shock to the system that has defined trade in the 2020s so far.
Thursday's primary prospects
The current pipeline is empty for GBP / EUR and USD in the Investment Grade (IG) space.
Wednesday's broader market developments
** EU stocks shook off some very minor opening weakness and were set to close higher after an in-line US CPI print. In the rates space, German yields remained choppy while the UST complex was bracing for a 10yr note reopening to follow Tue’s mediocre 3yr UST sale. US stocks moved higher following back-to-back losses for S&P500 and Nasdaq. OPEC cut 2024 demand forecasts sharply by 210k b.p.d. to 1.6m b.p.d although WTI remained in positive territory for the day trading just below USD70/brl
** Stoxx600 -0.28% at worst before moving back into the green. Communication Services leading gains
** Govvies: Choppy session for German debt with no overall direction (again) while recent outperformance of French debt stalled. Front end of the periphery outperformed with IT 2yr and SP 2yr yileds some 3.5bp and 4bp lower on the day. Steepening bias across jurisdictions
** Data:
- US Nov CPI YoY matched f/c at 2.7% (prev 2.6%)
- US Nov CPI Core YoY matched f/c at 3.3% (prev 3.3%)
What to watch Thursday - ECB decision and press conference
** Key Data: UK Nov RICS House Price Balance (00:01), IT 3Q Unemployment Rate Quarterly (09:00), US Nov PPI Final Demand (13:30), US Dec 7 Initial Jobless Claims (13:30), US Nov 30 Continuing Claims (13:30), JN 4Q Tankan Large Mfg Index / Outlook (23:50)
** Key Events: ECB Rate Decision (13:15), ECB President Christine Lagarde holds press conf (13:45)
** Government Auctions: Italy to sell up to EUR8.5bn 2027, 2031, 2035 and 2054 bonds (10:00), US to sell USD22bn 30yr bond (18:00)
** Earnings: 1 Stoxx600 and 2 S&P500 companies release results
All times GMT
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