Japanese investors hit Treasuries cash register – temporarily – into end-Sep fiscal half-year end
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ITC- ECB Market React: ECB adopts a symmetrical approach to inflation. Tasks committees to look at options. Econ recovery has disappointed ECB. Clear that governing council lacks unanimity.
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).
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CFTC positions June 25th: AMs shed some long-end duration in the post-FOMC: Data captures the sharp rally out of the dovish June FOMC meeting. The curve bull steepened aggressively as 2y yields dipped below 1.70% as the market moved to price in ~35bps cut in July. 2s10s steepened to a 28-30bps range while 5s30s broke above 80bps.
OIS pricing in 1.5bp to 6bp of additional cuts vs before June MPC meeting -Pricing suggests the next move will be a cut but outlook is uncertain– only half a 25bp cut is priced in over the next year - due to uncertainties around the outcome of Brexit and global tensions/slowdown
On Thursday at 12:00 BST, BoE will issue Policy Decision Current Policy: Bank Rate: 0.75%; Asset Purchase Programme: £435bn; Corp Bond Purchases: up to £10bn In Brief: -Analysts surveyed by BBG unanimously expect no change in policy rates -No change expected on QE programmes
On Thursday at 09:50 BST, France will auction OATs: €7.5 - 9.0bn 3y 0.00% Feb22, 4y 0.00% Mar23, 6y 0.00% Mar25 (~RX 23k futs) and OAT€i: €0.75 - 1.25bn 5y 0.25% Jul24, 11y 0.70% Jul30, 28y 0.10% Jul47 (~ RX 6k futs) Views: There is a lot of choice on sale today with 6 lines. French bonds appear popular at the moment and more specifically in the higher maturities. The 6y Mar-25 is closest to the vein of demand and still remains fairly close in Z-spread terms to equivalent maturity Belgian paper but cheaper than the smaller issuers of Austria and Finland. However, bid-cover numbers our auction history tables below demonstrate that short (sub 7y) French bonds have been the recipients of quite elevated bid-cover ratios recently and these auctions should offer little difficulty to digest.
-After the June FOMC meeting, the whole FOMC dated OIS curve is pricing in an additional 9bp to 17bp cuts vs 1 day before the meeting -Market is fully pricing two 25bp cuts by September (just 2 meetings away), approx. three 25bp cuts by year end and four by June 2020!