ON DECK FOR MONDAY, DECEMBER 8
KEY POINTS:
- ECB comments light up bond yields
- German factories are on a decent run
- Chinese exports grow faster than expected
- Yen underperforms on GDP revisions
- Quiet in N.A. ahead of a big week
- Global Week Ahead — Democratizing Economics (reminder here)
ECB comments are driving bond yields higher this morning alongside a few overnight data teasers. Other asset classes are mixed with equities generally little changed so far, ditto for many commodities with oil down about 1% but little movement in gold, and currencies are divided against the dollar.
ECB’S SCHNABEL FEEDS HIKE BETS INTO 2027
ECB Executive Board Member Isabel Schnabel lit up EGBs this morning by saying:
“Both markets and survey participants expect that the next rate move is going to be a hike, albeit not anytime soon,” she said last week in an interview in her office in Frankfurt. “I’m rather comfortable with those expectations.”
The first full 25bps hike isn’t priced until the April 2027 date which saw a 5bps increase on the back of her remarks (chart 1). There are trivial moves priced in before that point as the OIS curve begins to inflect toward remote chances at a hike late next year.
EGBs cheapened at the open by 3–6bps across maturities and countries. Gilts sold off in sympathy and some of this effect is trickling across the pond into US Ts.
Schnabel also said she is open to succeeding Lagarde if asked but she shouldn’t hold her breath. Lagarde’s term isn’t up until October 2027.
LIGHT OVERNIGHT DATA
German industrial output may have also provided a lift with a gain of 1.8% m/m SA in October (0.3% consensus) and a slight downward revision (1.1% from 1.3%). This adds to a decent round of monthly data out of Germany including strong back to back gains in factory orders and with exports on tap for release tomorrow.
Chinese trade figures also beat. Exports were up by 5.9% y/y SA in November (4% consensus) but with imports up 1.9% (3% consensus). The trade surplus widened on both effects.
Q3 Japanese GDP was revised down three tenths to a slightly larger contraction of -2.3% q/q SA. That was because business spending flipped from a small gain to a small decline. Also, real wages fell at a slower than consensus pace in October (-0.7% y/y, -1.2% consensus).
There are no notable releases due out of the US or Canada today.
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