The US & Germany 10-30y spreads have been heading in opposing directions for the past week or so. The result has left the US 10-30y spread steeper than in Germany, by around 4bp using the benchmarks.
USTs: At 13:00ET/18:00BST, the Treasury will auction $24bn re-opened 1.625% 8/15/2029s General Views: This week’s supply has been complicated by the looming US/China trade talks and the numerous headlines related to the negotiations. This backdrop may underpin demand for safe assets but makes set-up more difficult and may limit participation at the margin
Japan’s Government Pension Investment Fund -- the world's largest pension fund -- buys the US dollar/ yen (buy US$/sell yen) and then use those proceeds to buys short-end US Treasuries on an unhedged basis, when the US$/yen is about Y108, and then when the US$/Yen moves up to Y110, it sells both, said observers citing an ongoing practice. That would lock in a 1.85% profit on the foreign exchange side, plus some residual P&L from the USTs movement.
The views of InTouch Capital Markets on the “hawks” and “doves” at the European Central Bank (ECB), the FOMC and the Bank of England (BoE).
There is a relationship that exists across GBP, EUR, USD markets, which is that the 10y swap rate is a linear function of the 5th forward LIBOR and the 5th-9th spread.
ITC - EGB Supply announcements and January syndication patterns
ITC - Quick JGBs - Closing in on zero
ITC Month-End Extension Estimates: Gilts: 0.00 US Tsy: 0.12 EGBs: 0.08
ITC: There has been a significant tightening between the 10y BTP-GGB spread: Year-to-date; the spread is down from 138bps to its lowest levels of 16.5bp.
On Thursday at 12:00 GMT, BoE will issue Policy Decision Current Policy: Bank Rate: 0.75%; Asset Purchase Programme: £435bn; Corp Bond Purchases: up to £10bn In Brief: - Analysts expect no change in monetary policy including rates & QE - MPC likely to vote 9-0 for keeping all policy unchanged - Most analysts believe everyone on the MPC is firmly in ‘wait and see’ mode due to uncertainty created by the extension of the Brexit deadline and the upcoming Dec 12th general election.