Not much news today. The economic calendar was all but empty and high-profile Fed speeches are not due until later today. Denmark is dropping the use of the AstraZeneca completely from its vaccination programme. Other (mainly EU) countries might follow this example. The news follows yesterday’s setback in the Johnson & Johnson vaccine. On the upside, Pfizer announced it will boost supply to the EU by bringing forward 50 million doses planned for Q4 to the current quarter. The first US bank results came in strong. Goldman Sachs rose after revenue and earnings rose to a record, supported by (equity) trading. Investment-banking fees surged from equity underwriting amid an IPO boom. A similar story holds for JPMorgan, which also saw the best quarter ever, helped higher by strong trading, searing investment-bank fees and a larger-than-expected release of reserves set aside for future loan losses. However, loan issuance fell and the bank warns for tepid loan demand going forward. European stock markets trade 0.2-0.4% in the green. Wall Street opens with minor gains. US yields gain up to 2.9 bps (5-yr), the belly of the curve again underperforming. The US 10-yr yield (+2.5 bps) avoid a break below neckline support situated around 1.6% but fails to re-enter the upward sloping trend channel for now. German yields gapped lower at the European open before staging a choppy comeback. Yield changes mount to a little more than 1 bp from the medium-to-long end of the curve. Peripheral yield changes are marginal.
FX markets trade muted. The US dollar remains under slight selling pressure against the major currencies. First and important resistance in EUR/USD is situated near 1.199 but never really came on the radar (yet?) today due to an equally lackluster euro. The currency pair is flipflopping around 1.197 (up from 1.195 yesterday). The trade-weighted dollar is pinched in a very narrow range between the 38.2% retracement of 2021’s advance (91.82) and the September 2020 correction low (91.74). USD/JPY dipped below 109 before paring some of the losses. Keeping that barrier looks tricky still though. EUR/JPY attempts to take out recent highs in the 130.5 area. Both the Aussie (on oil price gains) and the kiwi (in the wake of the RBNZ and technical considerations) lead the scoreboard, both against EUR and USD. EUR/GBP followed steps in EUR/USD with the 1.196 over there being 0.868 in the sterling combination. The duo overcame initial weakness to rise towards 0.87. As seen over the previous days, repellent forces prevent that handle from being conquered.
The European Commission released its borrowing intentions to finance NextGenerationEU which aims to support the economic recovery and build a greener, more digital and more resilient future. The programme will be funded by borrowing up to around €800bn between now and end-2026. This will be evenly spread with an average of around €150bn/year and all borrowing will be repaid by 2058. The EC’s diversified funding strategy will be communicated bi-annually and consists of a combination of EU bills and medium and long term bonds (including green bonds) at both regular scheduled auctions and irregular syndications. Next steps include setting up a primary dealer network and publishing the first annual borrowing decision and first NextGenerationEU funding plan (expected this summer).
ECB Vice-President Luis de Guindos told a European parliamentary hearing that risks from the early withdrawal of policies are higher than the risks associated with keeping support measures in place. Monitoring favourable financing conditions will remain the central bank’s guide in the short and medium term with the ECB ready to react if there is a detrimental tightening of financing conditions before the pandemic is over. In March, the ECB already acted in such way, by frontloading PEPP purchases in Q2.