ON DECK FOR MONDAY, OCTOBER 30
KEY POINTS:
- A fresh trading week starts with US-European yield divergence…
- …as US Treasuries await step 1 of the week’s debt announcements…
- …and EGBs digest softer than expected inflation updates
- The shock potential of this week’s US debt news may not be as large this time
- BoC’s Macklem has a chance to clarify his remarks today
- Global Week Ahead reminder
As a reminder, please see the Global Week Ahead—The QT and Refunding Tango here. The full publication is in clients’ inboxes along with the summary slide deck. Key topics on tap this week will include:
- Treasury’s debt sales plan may be taken more in stride this week
- FOMC is expected to stay on hold amid upside risks to inflation
- US productivity to offset higher labour costs
- BoJ watchers on guard for policy tweaks
- BoE expected to hold as the macro environment sours
- Will US nonfarm payrolls repeat the prior big gain?
- BoC’s Macklem gets another chance. Two in fact.
- Canada’s economy is plodding along despite shocks aplenty
- Will acute Canadian wage pressures abate?
- Norges Bank expected to pause
- BanRep expect to extend its hold
- Brazil’s central bank likely to cut again
- Bank Negara playing defence on ringgit weakness
- China’s PMIs to inform Q4 growth momentum
- Eurozone CPI expected to continue easing
- GDP: Eurozone, Canada, Mexico, Peru, Sweden,
- CPI: Peru, SK, Indonesia, Switzerland
- Heavy earnings calendar
- Other Global Macro
Yield divergence between N.A. and Europe is a defining feature of the start to a fresh trading week.
Treasuries are cheapening by a few basis points perhaps partly out of fear toward what this afternoon’s debt estimates may reveal. European yields are comparatively outperforming by modest margins as further evidence of softer than expected CPI is taken down after Friday’s limited evidence from one German state. Equities are mildly higher by about ½% to 1% across N.A. futures and European cash markets. Oil is down by over a buck across the main benchmarks as yet again the weekend came and went without feared major escalation in the Middle East.
The US Treasury announces Q4 marketable borrowing estimates today at 3pmET. It’s round one of the two-step process to determine whether bonds face a repeat of what happened starting on July 31st and August 2nd. On Wednesday at 8:30amET, Treasury will then announce the Q4 Quarterly Refunding Statement that lays out the size and frequency of auctions. As noted in Friday’s Global Week Ahead and accompanied by further details, the debt issuance plans of the US government could well steal the show from Chair Powell and the FOMC this week, although the shock potential is probably much lower now after markets have digested the higher issuance numbers and the accompanying forward guidance to expect more in future quarters. Furthermore, recall that the last time around also dealt with the BoJ surprise a few days earlier on July 27th and we’ll see if another surprise lurks this time or not when the BoJ announces tomorrow.
Shortly after today’s Treasury announcement, BoC Governor Macklem and SDG Rogers deliver round 1 of their parliamentary committee testimony before the House of Commons Standing Committee on Finance. It starts with an opening statement that will be available at 3:30pmET and then goes into Q&A. He may clarify somewhat mixed remarks last week that started with a hawkish hold on Wednesday and then gave way to more dovish remarks in a radio interview the next day, although the context was likely important.
Germany and Spain kicked off tracking of Eurozone CPI on a dovish note this morning. More individual German states released estimates for October CPI and they are tracking beneath consensus estimates for the national add-up that we get a little later this morning (9amET). The individual states revealed estimates of between -0.1% to 0% m/m. Spain also released CPI that landed at 0.3% m/m (0.5% consensus) with core also weaker than expected; the headline rise in Spain was among the weakest seasonally unadjusted gains for like months of October on record (chart 1). The eurozone totals along with France and Italy arrive tomorrow.
German GDP was a touch stronger than expected including on revisions. Q3 contracted by -0.1% q/q SA nonannualized (-0.2% consensus) and the prior quarter was revised up a tick to 0.1%.
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