• Curve flattening resumes on ECB comments, COVID-19 cases
  • Lagarde offers cryptic policy hints
  • Several countries are seeing rising COVID-19 cases
  • Global Week Ahead

Please see the Global Week Ahead—What Are Bonds Saying? (here). Also see your Scotia sales contact for the chart deck version.

A new trading week is starting off with mild risk aversion and empty calendars. There were no releases overnight and there will be nothing material on tap for today’s North American session. Curves are back to flattening a touch with 10s down by 1–4bps across US Ts, gilts and EGBs and with Italian spreads narrowing over bunds partly on ECB comments (see below). The dollar is slightly firmer against most major currencies. US and Canadian equity futures are down ¼% with European cash markets off by up to ½% in London.

ECB President Lagarde gave cryptic hints at potential policy changes at the July 22nd meeting during a weekend interview. She said there will be “some interesting variations and changes” and “it’s going to be an important meeting” while noting “forward guidance will certainly be revisited.” The asset purchase program guidance was not new in that she only indicated the program will continue through to ‘at least’ March 2022 which matches existing guidance.

Please see the accompanying charts for a depiction of new COVID-19 cases per capita on a 7-day moving average basis across the world in the usual update provided at the start of each week. There are enough regions of the world with rising trends to merit caution.

  • Europe: The UK continues to see an upward trend on the eve of potentially dropping safeguards at the end of the week. Spain, the Netherlands and Portugal are also see upward trends and there is a very slight upward trend in Germany.
  • Latin America: All countries that are tracked are posting declines in cases with a so far minor exception being a slight upward trend in Mexico. Case rates remain very high in several countries.
  • Asia-Pacific: Malaysia’s curve is back on a definite upward trend and joined by Indonesia and Thailand.
  • US: So far it’s a very slight change, but the US per capita case rate is bottoming with a tiny upward trend particularly focused upon the US South and Midwest. 56% of Americans aged 12+ are doubled dosed and 65% have received at least one dose (here), so mathematically it wouldn’t take much for the curve to explode again particularly given the speed at which all caution appears to have been abandoned. If it’s a normal distribution, then half the folks among the many not wearing masks at sporting events are not double vaccinated.
  • Canada: So far so good as nationwide cases remain very low and ditto across all provinces. 49% of Canadians 12+ are fully vaccinated with 79% having received at least one dose (here). The 1+ dose rate is meaningfully higher than the US. I’d like to see cases over the next 2–4 weeks to have greater comfort given what I’ve observed to be widespread abandonment or lessening of COVID-19 cautions. 



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