Sun, Mar 07, 2021 @ 06:35 GMT
Home Contributors Fundamental Analysis BOE Gov Sees Issues With Negative Rates, Bond Issuance Flows Remain Heavy

BOE Gov Sees Issues With Negative Rates, Bond Issuance Flows Remain Heavy


  • BOE Gov Bailey noted review of negative rates ongoing; viewed move into negative territory as a controversial issue
  • Plethora of issuance continues in the new year


  • Japan Nov Current Account: ¥1.88T v ¥1.55Te; Adj Current Account: ¥2.34T v ¥1.99Te
  • Japan PM Suga said to be considering declaring an emergency in 3 other prefectures in greater Osaka and Kyoto


  • Total global cases 90.9M (+0.7% d/d); total deaths: 1,95M (+0.5% d/d)


  • UK Dec BRC Sales LFL Y/Y: 4.8% v 7.7% prior. Overall 2020 retail sales were -0.3% y/y which was the lowest level since data started back in 1995.


  • Biden to announce his fiscal stimulus plan Thursday (Jan 14th) and it was expected be in the trillions.
  • VP Pence confirmed to work with President Trump through end of term Jan 20th in face to face meeting
  • House Democrats formally introduce Articles of Impeachment against President Trump for “incitement of insurrection” (as expected)
  • House Maj Leader Hoyer stated that there might very well be impeachment vote on Wed (Jan 13th); Rules Committee to meet on Tuesday on the 25th Amendment option
  • FBI memo said to warn of plans for armed protests in all 50 state capitals on Inauguration Day
  • Fed’s Kaplan (non-voter in 2021) stated that hoped to start a discussion on tapering bond purchases later this year if economy goes as expected. If there is more fiscal stimulus under new President that minght be a consideration for monetary policy
  • Fed’s Bostic noted that it must offer relief to many economic sectors; had a ways to go from an employment perspective. Was possible a very strong rebound could change Fed policy outlook
  • Fed’s Barkin (voter in 2021, hawk): Would have to see substantial progress toward Fed goals before we even discuss QE tapering
  • Canada PM Trudeau said to be considering cabinet shuffle with several ministers, expected to be announced Tuesday, Jan 12th



  • Indices [Stoxx600 +0.18% at 409.14, FTSE -0.35% at 6,774.76, DAX +0.08% at 13,948.15, CAC-40 0.00% at 5,662.19, IBEX-35 +0.35% at 8,387.00, FTSE MIB -0.32% at 22,648.50, SMI -0.12% at 10,857.61, S&P 500 Futures +0.26%]
  • Market Focal Points/Key Themes: European indices open generally higher but later lost direction; coronavirus back in focus after worldwide new case numbers hit record yesterday; better performing sectors include energy and financials; among sectors showing weakness are utilities and real estate; US tariffs on European airplane parts goes into effect; Zur Rose partners with Novo Nordisk on obesity treatments; no major earnings expected during the upcoming US session


  • Consumer discretionary: Games Workshop [GAW.UK] -6% (earnings)
  • Healthcare: Medivir [MVIRB.SE] +25% (partnership)
  • Industrials: Kingfisher [KGF.UK] +3% (trading update)
  • Technology: Playtech [PTEC.UK] +5% (trading update), EKF Diagnostics [EKF.UK] +6% (trading update)


  • ECB’s Schnabel (Germany) Inflation seen rising in 2021but added that a short-term rise in inflation would not change monetary policy
  • BOE Gov Bailey stated that had little evidence of the scale of economic impact from latest lockdown measures. Best guess for Q4 GDP was flat or slightly down with Q1 GDP likely to be weaker than in BoE’s Nov outlook. He added that it was too soon to reach any conclusions about the need for future stimulus. UK savings rate has risen sharply and this was important going forward. Negative rates were a controversial issue; no country had used them for its retail sector. Continuing doing work to see if negative interest rates were practical
  • German Chancellor Merkel said to see lockdown lasting until early April
  • France Fin Min Le Maire stated that a significant economic rebound was possible in H2 but the 6.0% GDP growth forecast was a challenge
  • German Industrial Association (BDI) forecasted 2021 GDP growth 3.5%. Domestic economy had good chance to reach pre-covid crisis level in H1 2022
  • Thailand Dep PM stated that saw no need for additional borrowings. Govt expects to contain most recent outbreak of virus by end of March
  • China said to have asked the finance sector to limit debt raised overseas

Currencies/ Fixed Income

  • USD held on to most of its recent gains among the major pairs as it continued to be supported by its recent rise in Treasury yields.
  • GBP currency did buck the overall trend in FX and was firmer in the session as market pushed back the possibility of a looming BOE rate cut until the end of 2021. BOE Gov Bailey was not as pessimistic in his comments regarding the economic impact of the current lockdown restrictions and added that UK savings rate had risen sharply and this was important going forward. Bailey also downplayed the negative rate scenario and reiterated that its review of such a move was still ongoing. GBP/USD at 1.36 by mid-session
  • EUR/USD steady at 1.2150 level
  • Debt issuance continue to be heavy in early Jan on the the corporate and sovereign fronts

Economic data

  • (NL) Netherland Dec CPI M/M: +0.2 v -0.8% prior; Y/Y: 1.0 v 0.8% prior
  • (NL) Netherland Dec CPI EU Harmonized M/M: +0.5% v -1.2% prior; Y/Y: 0.9% v 0.7% prior
  • (FI) Finland Nov Current Account Balance: -0.1€B v +€0.4B prior
  • (NO) Norway Nov Overall GDP M/M: -0.1% v -0.7% prior; Mainland GDP M/M: -0.9% v -1.6%e
  • (NO) Norway Q4 House Price Index Q/Q: 2.7% v 2.5% prior
  • (RO) Romania Q3 Final GDP (3rd reading) Q/Q: 5.8% v 5.6% prelim; Y/Y: -5.7% v -6.0%e
  • (SE) Sweden Dec Budget Balance (SEK): -125.9B v +40.4B prior
  • (IT) Italy Nov Retail Sales M/M: -6.9% v +0.5% prior; Y/Y: -8.1% v +2.8% prior

Fixed income Issuance

  • (BE) Belgium Debt Agency (BDA) opened its book to sell EUR-denominated Oct 2031 OLO bond via syndicate; guidance seen -7bps to mid-swaps; order book over €42B
  • (NL) Netherlands Debt Agency (DSTA) sold €2.885B vs. €1.0-2.0B indicated range in 0% Jan 2052 DSL bonds; Avg Yield: -0.027% (syndicated on Sept 22nd 2020)
  • (ZA) South Africa sold total ZAR6.6B vs. ZAR6.6B target in 2026, 2032 and 2035 bonds
  • (ID) Indonesia sold total IDR11.3T vs. IDR14.0T target in Islamic bills and bonds (sukuk)
  • (ES) Spain Debt Agency (Tesoro) sold total €6.13B vs. €5.5-6.5B indicated range in 6-month and 12-month bills
  • (IT) Italy Debt Agency (Tesoro) sold €7.0B vs. €7.0B indicated in 12-month Bills; Avg Yield: -0.478% v -0.498% prior; Bid-to-cover: 1.53x v 1.83x prior
  • (UK) DMO sold £3.0B in 0.125% 2028 Gilts; Avg Yield: 0.176% v 0.116% prior; Bid-to-cover: 2.75x v 2.67x prior; Tail: 0.2bps v 0.2bps prior
  • (AT) Austria Debt Agency (AFFA) sold total €1.38B vs. €1.38B indicated in 2030 and 2051 RAGB bonds
  • Sold €747.5M in 0.0% Feb 2030 RAGB bond; Avg Yield: -0.399% v -0.389% prior; Bid-to-cover: 2.16x v 3.55x prior (Oct 6th 2020)
  • Sold €632.5M in 0.75% 2051 RAGB Bonds; Avg Yield: 0.159% v 0.321% prior; Bid-to-cover: 2.14x v 2.44x prior

Looking Ahead

  • (EU) Daily ECB Liquidity Stats
  • 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills
  • 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO) (prior €180.0M with 8 bids recd)
  • 05:30 (DE) Germany to sell combined €600M in 2030 and 2046 Inflation-linked bonds (Bundei)
  • 05:30 (BE) Belgium Debt Agency (BDA) to sell €2.8-3.2B in 3-month and 12-month bills
  • 06:00 (US) Dec NFIB Small Business Optimism Index: 100.3e v 101.4 prior
  • 06:00 (IE) Ireland Nov Industrial Production M/M: No est v 0.0% prior; Y/Y: No est v -14.9% prior
  • 06:00 (ZA) South Africa Nov Manufacturing Production M/M: 1.5%e v 2.6% prior; Y/Y: -1.7%e v -3.4% prior
  • 06:00 (IL) Israel Dec Consumer Confidence: No est v 76 prior
  • 06:00 (BR) Brazil Jan IGP-M Inflation (1st Preview): 0.9%e v 1.3% prior
  • 06:00 (FI) Finland to sell combined €2.0B indicated in 6-month and 9-month bills
  • 06:30 (UK) DMO to sell £1.25B in 1.625%Oct 2054 Gilts
  • 06:30 (EU) ESM to sell €1.1B indicated in 12-month Bills
  • 07:00 (BR) Brazil End-Dec IBGE Inflation IPCA M/M: 1.2%e v 0.9% prior; Y/Y: 4.4%e v 4.3% prior
  • 07:00 (IN) India Nov Industrial Production Y/Y: -1.0%e v +3.6% prior
  • 07:00 (IN) India Dec CPI Y/Y: 5.0%e v 6.9% prior
  • 07:00 (MX) Mexico Oct Gross Fixed Investment: -13.5%e v -16.0% prior
  • 08:00 (UK) Daily Baltic Dry Bulk Index
  • 08:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed)
  • 08:55 (US) Weekly Redbook LFL Sales data
  • 09:00 (EU) Weekly ECB Forex Reserves
  • 09:35 (US) Fed’s Brainard at symposium
  • 09:45 (UK) BOE to buy £1.48B in APF Gilt purchase operation (over 20-years)
  • 10:00 (US) Nov JOLTS Job Openings: 6.50Me v 6.652M prior
  • 10:00 (MX) Mexico Weekly International Reserve data
  • 10:30 (CA) Canada to sell 3-month, 6-month and 12-month bills
  • 11:00 (RU) Russia Dec Final CPI M/M: No est v 0.8% prelim; Y/Y: No est v 4.9% prelim
  • 11:00 (RU) Russia Dec CPI Core M/M: 0.5%e v 0.5% prior; Y/Y: 4.3%e v 3.9% prior
  • 11:00 (US) Fed’s Rosengren (non-voter) with members Kashkari (non-voter) and Kaplan (non-voter)
  • 12:20 (ES) ECB’s De Cos (Spain)
  • 13:00 (MX) Mexico Dec Total Formal Job Creation: No est v +148.7K prior
  • 13:00 (US) Treasury to sell 10-Year Notes
  • 14:00 (US) Fed’s Rosengren (non-voter)
  • 16:00 (NZ) New Zealand Jan Heavy Truckometer Index: No est v -0.3% prior
  • 16:30 (US) Weekly API Oil Inventories
  • 18:00 (KR) South Korea Dec Unemployment Rate: 4.1%e v 4.1% prior
  • 18:50 (JP) Japan Dec M2 Money Stock Y/Y: 9.2%e v 9.1% prior; M3 Money Stock Y/Y: 7.6%e v 7.6% prior
  • 19:00 (NZ) New Zealand Jan Commodity Price Index: No est v 0.9% prior
  • 19:30 (AU) Australia Nov Job vacancies: No est v 59.4% prior
  • 22:00 (KR) South Korea Nov M2 Money Supply Y/Y: No est v 1.1% prior
  • 22:35 (JP) Japan to sell 5-Year JGB Bonds
  • 23:30 (JP) Japan Dec Bankruptcies Y/Y: No est v -21.7% prior


Trade The News
All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. Trading decisions are the responsibility of traders, not those providing additional information. Trade The News is not liable (financial and/or non-financial) for any losses that may arise from any information provided by TTN. Trading securities involves a high degree of risk, and financial losses can and do occur on a regular basis and are part of the risk of trading and investing.

Featured Analysis

Learn Forex Trading