Global core bonds are trading mixed to little changed today with US Treasuries underperforming German Bunds. Core bonds already ended close to unchanged last Friday and hovered sideways today as well. Disappointing German industrial production data for January had little impact on German Bunds before the EU opening bell. Risk sentiment in Asia was positive overnight. European equities opened cautiously in green, weighing slightly on core bonds. The German yield curve is mixed with changes in the range of -1.0 bp (5-yr) to +0.7 bps (30-yr). US Treasuries edged lower throughout the day. The mid-month refinancing operation will start later today with the sale of 3-yr Notes. January US retail sales printed mixed and had little impact on trading. The headline reading rose 0.2% M/M vs. a downwardly revised-1.6% in December. The control group reading, a proxy for US consumption growth, rose 1.1% (M/M) in January, well above consensus (0.6% M/M). However, the December reading was downwardly revised from -1.7% to -2.3% (M/M). The market reaction remained limited, even as US equity markets opened strong. The US yield curve is moving higher with changes up to 1.4 bps (30-yr). Peripheral spreads are close to unchanged with Italy (+5 bps) underperforming as the government coalition is bickering about a French-Italian rail line.

Global markets are trading in a rather constructive way (risk-on) given investor worries on growth in the wake of last week’s ECB policy guidance and considering Friday’s mediocre US payrolls. Asian equities rebounded. Sentiment in Europa is more cautious. German production data were mixed at best. Even so, EUR/USD regained slightly further ground. ECB’s Coeuré said last week’s guidance on interest rates shouldn’t be considered as a change in the ECB course. We doubt that this ‘clarification’ will be a big help for the euro short-term. The intraday EUR/USD rebound stalled in the mid 1.12 area. US retail sales were the next meaningful data reference for guidance on (US & global) growth. However, the report failed to give a clear signal on the momentum in US spending (January better than expected, but further downward revision of December). The reaction of US yields and the dollar was insignificant. EUR/USD hovers in the mid 1.12 area. USD/JPY struggles not to fall below the 111 handle even as sentiment on risk is quite positive. So, last week’s USD outperformance has been put on hold, at least for now.

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The headlines from the latest episode in the UK-EU Brexit talks only confirmed that the deadlock persists just one day before UK PM May has to bring a (new?) Brexit deal to Parliament for another ‘meaningful vote’. The growing prospect/risk of political chaos in the UK weighed slightly on sterling this morning, but the UK currency soon found a better bid again. For now, we didn’t seen any clear indication that chances on an orderly Brexit are growing. In this respect, current relative sterling strength remains striking. EUR/GBP is again trading near the 0.86 pivot. Cable is changing hands in the 1.3075 area, compared to levels below 1.30 in early European dealings this morning.

News Headlines

Norwegian inflation rose 0.8% MoM (3.0% YoY) in February following a -0.5% MoM decline (3.1% YoY) in January. Core measures excluding tax changes and energy also jumped (1.2% MoM, 2.6% YoY), as did February’s PPI (0.4% MoM, 8.0% YoY). The krona advanced 0.5% as the data beat market estimates, trading close to EUR/NOK 9.77.

Czech CPI inflation accelerated more than expected in February even after January’s steep increase. Prices edged higher at 0.2% MoM (2.7% YoY) vs. 0.1% (2.6% YoY) anticipated but leaving the Czech koruna unimpressed. EUR/CZK even gained slightly, changing hands at 25.66.

The Turkish economy slipped into recession territory in 2018. The country posted negative growth of -2.4% QoQ (‑3.0% YoY) in 2018Q4, following a red Q3 (-1.6% QoQ). The lira showed some intraday volatility after the release but recovered losses soon as investors largely anticipated the weak outcome. EUR/TRY hovers around 6.12.


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