HomeContributorsFundamental AnalysisWeek Ahead – Will the Bond Market Remain in a Holding Pattern?

Week Ahead – Will the Bond Market Remain in a Holding Pattern?

Financial markets seem to be constantly recalibrating. The economic data is expected to be volatile and that should support the Fed’s patient stance on waiting for enough data to make a clear assessment over pricing pressures and the strength of the labor market recovery.

Inflation expectations are weighing on sentiment, but Treasury yields seem like they may be stuck in a holding pattern a little while longer. The front end of the curve is not moving and since expectations are so high for the US economic recovery, the bond market is still mostly counting on disinflationary forces to win out.

The focus for the upcoming is heavily tilted to the Fed. The Fed’s April meeting minutes will be released and could provide some clarity over their inflation expectations. Investors will closely listen to the Fed’s Clarida, Bostic, Kaplan, Bullard, and Barkin. Key economic releases include a round of housing data, a couple of Fed regional surveys, jobless claims and the flash PMI estimates.



Traders will overanalyze the Fed’s April meeting minutes to see how upbeat Fed officials have become and if they provide any hints on how to define “transitory” when it comes to inflation.  The minutes however are very dated and predate both the disappointing nonfarm payroll report and hotter than expected CPI and PPI readings.

It is a busy week filled with economic releases.  On Monday, the first regional Fed survey from the Empire State is expected to show manufacturing softened slightly.  Tuesday could show a cooling housing market with a slight dip with housing starts and a modest increase in building permits.  Wednesday is all about the FOMC Minutes, while Thursday focuses on weekly jobless claims and the Philly Fed Business Outlook which should remain strong but at a softer pace than last month.  Friday will provide the May flash PMI readings, which should post minimal improvements in both the manufacturing and services sectors.

The reopening of the US economy is going to enter another gear as most capacity restrictions will be eased across much of the country.


On Wednesday, the Eurozone releases Final CPI for April. On an annualized basis, the forecast for headline CPI stands at 1.6%, which is comfortably close to the ECB’s at below but close 2% target.

On Thursday, there are a number of panels with speakers from European central banks. ECB President Lagarde, Governing Council member Holzmann and IMF Managing Director Georgieva speak at a conference on “Gender, Money and Finance,” hosted by the Austrian National Bank.

On Friday, Eurozone finance ministers and central bank chiefs hold an informal meeting. This will be followed on Saturday with a meeting of a larger group of EU finance ministers and central bank chiefs. Italy and the European Commission co-host the G-20 Global Health Summit in Rome.

Also on Friday, there is a dump of eurozone data. German Manufacturing PMI for May is expected to dip to 66.0, down from 66.2. The Eurozone Manufacturing PMI is also expected to slow to 62.3, down from 62.9. The 50-level separates contraction from expansion.

German consumer confidence remains in negative territory. The May estimate stands at -7.5, which would be a slight improvement from the April read of -8.1 points.


On Monday, the U.K. government will proceed to phase three in easing the lockdown restrictions as part of the “roadmap” to recovery. The new rules will allow for both outdoor and indoor gatherings. Most businesses will be allowed to reopen, with the exception of those in high-risk sectors. International travel will be allowed to a “green list of countries”, and travelers will not need to quarantine upon return.

On Tuesday, the UK releases unemployment claims and ILO unemployment.  This will be followed with a hot inflation report for the month of April on Wednesday, with a consensus of 0.6% (MoM) and 1.5% (YoY). On Friday, the UK releases Retail Sales data for April and the May Flash PMI readings.  Retail sales on a monthly basis is expected to soften, while the flash PMI estimates should remain robust.

Emerging Markets


The Hungary Central Bank will announce a rate decision on Tuesday. No change is expected to the current rate of 0.60%, with the bank waiting on any rate hikes.

Hungary’s inflation remains a key concern, as inflation was the fastest in Europe and the highest since 2012. At the same time, core inflation was much more stable, with a rise of only 3% in April, which was the lowest since 2019. Central bank policymakers are in a wait-and-see mode, with the bank forecasting that the rise in inflation will temporarily peak at around April’s levels before slowing to within the 2%-4% tolerance range in the summer.

Money-market traders raised bets for a rate hike in the next three months only slightly after the data was published, still broadly expecting an increase of about 15 basis points via the central bank’s most-influential one-week deposit rate.

South Africa

South Africa releases the April inflation report on Wednesday. CPI (YoY) is expected to rise to 4.3%, up from 3.2% beforehand. This would still be below the 4.5% midpoint of the Reserve Bank’s target range for inflation.

The Reserve Bank meets on Thursday and is expected to maintain interest rates at 3.50%. Inflation has been rising and the bank could hike rates in this quarter.


China releases Industrial Production and Retail Sales on Tuesday. Both should show impressive, but slowing increases after a post Lunar New Year March rebound. Lowball prints may take some of the heat out of the international inflation story, which counterintuitively, could be supportive of Asian equities.

China’s 1 and 5-year Loan Prime Rates are announced on Thursday. It would be a huge surprise if they were hiked and would likely provoke an immediate regional Asia equity and currency sell-off. Q4 remains the most likely window for hiking.

Both the Shanghai Composite and CSI 300 look fragile, but have shown remarkable resilience this past week as equity markets cratered elsewhere. Regulatory threats on China big-tech continue to cap gains, but it is clear that China’s “national team” remain on the bid on any negative price move. If they step aside, the fall could be quite aggressive.


India’s Covid-19 disaster continues to grab headlines and although cases remain above 400,000 per day with that reality, and a spike in US inflation finally taking the wind from international investor sails. Equities and the Rupee have stopped rising although both remain near to recent highs. The INR should remain supported as Covid-19 crushes domestic consumption meaning oil importers need to buy less US Dollars.

India releases very important WPI data on Tuesday, with a return to stagflation very much on the cards. Headline WPI inflation printing above 9.0% YoY for April is likely to provoke selling of INdian equities and the INR again, with the central bank powerless to raise rates at this time.

Conversely, any signs that India’s Covid-19 tragedy is easing is likely to see a lot of fast money pile into both for a buy the dip recovery trade.

Australia & New Zealand

No significant data from New Zealand. Australia releases RBA minutes on Tuesday where markets will be looking for dissension among policy makers on tapering. Employment on Thursday will struggle to overcome March’s blockbuster 91,500 headline. Australian data continues to be consistently strong and another big number will be a short-term boost to equities and the AUD.

As global risk-sentiment barometers and Asian currency proxies, the AUD and NZD have endured a torrid week as inflation fears finally washed over global markets. Both currencies are nearing important support and could fall another 200 points next week if risk sentiment remains weak. Both are completely at the mercy of moves in the US Dollar, mostly in the New York timezone, as they have been this past week.


Japan adds more provinces to its Covid-19 states of emergency, a theme we are now seeing recurring all over Asia. Japanese investors are clearly nervous as they have aggressively hitched their wagon following the volatility of the Nasdaq this week. I expect that to continue next week and if the inflation story torpedoes the Nasdaq, the Nikkei will follow. The Nikkei 225 broke multi-month support going back to January, at 28,300 this week, and needs to recapture this level quickly, otherwise it will target 26,000 initially. A selloff in New York next week could see the Nikkei target arrive sooner than expected.

Japan releases GDP on Tuesday for Q1, Industrial Production on Wednesday and the Tankan Survey and Balance of Trade on Thursday. Only a surprise on IP is likely to move local markets which are myopically focused on US markets and dominated by nervous retail flows.

The widening of the US/Japan 10-year rate differential should see USD/JPY  rise above 110.00 in the coming week.



Crude prices are seesawing as energy markets wait to see how bad of an impact will fresh lockdowns across Asia have on the demand outlook.  Fresh lockdowns across Jakarta, Kuala Lumpur and Singapore will make it difficult to be optimistic about demand over the next month.  The situation in India remains center stage and while they appear to be nearing their peak, the end still seems to be very far away.

In the US, the restart of the Colonial Pipeline should lead to a gradual improvement with fuel shortages across the East Coast. Expectations are that the pipeline will be back to normal within two weeks.

Expectations remains for oil to trade rangebound as markets await an uneven reopening of the global economy.   Geopolitical risks across the Middle East and poorer OPEC+ compliance could trigger some volatility in the short-term, but prices seem fairly anchored here.


Gold could continue to rally if the Fed officials continue to downplay the rising price pressures as temporary.  If Wall Street begins to believe the Fed that they will remain lower-for-longer with interest rates, the dollar should remain vulnerable and that should be positive for gold prices.

The biggest risk for gold remains when the Fed will have to talk about tapering asset purchases.  The eventual taper tantrum could happen by the end of summer, but for now investors do not want to try to get ahead of that trade.


Cryptocurrency traders are not sure what to make with the sudden focus on improving the efficiency of transactions.  The increased use of fossil fuels for Bitcoin mining is not a new revelation but seems to be a critical focal point now that needs to be addressed before Corporate America can continue to embrace cryptos.

Chaos over Dogecoin will dominate headlines and seems to continue to drive attention away from both Bitcoin and Ethereum.

Crypto exchanges and companies are under the microscope now and crypto traders should expect to hear more from US regulators.  SEC Chairman Gensler will continue to focus on improving investor protections and providing regulatory clarity.

Key Economic Events

Saturday, May 15

  • The US National Hurricane Center starts delivering advisories in the Atlantic, two weeks before the official start of the hurricane season.

Sunday, May 16

  • None

Monday, May 17

  • 13F Filings: Hedge Funds with more than $100 million of US stocks disclose their holdings
  • Fed Vice Chair Clarida and Atlanta Fed President Bostic will have a chat at the Atlanta Fed’s annual Financial Markets Conference.
  • French President Macron hosts the Paris Peace Forum Spring meeting

Economic Data:

  • US May Empire manufacturing: 23.9e v 26.3 prior; TIC Flows
  • UK Rightmove house prices
  • China retail sales, industrial production, jobless rate
  • Canada housing starts
  • Italy CPI
  • Poland CPI
  • Russia GDP
  • Thailand GDP
  • Japan PPI, machine tool orders
  • Singapore electronic exports, non-oil domestic exports
  • Czech PPI
  • Turkey budget balance

Tuesday, May 18

  • Dallas Fed President Kaplan speaks in a panel discussion moderated by Atlanta Fed’s Bostic, during his bank’s annual Financial Markets Conference.
  • French President Macron hosts the Summit on Financing African Economies, in Paris. Italian PM Draghi and European Commission President von der Leyen will also speak.
  • Sweden’s Riksbank Deputy Governor Ohlsson speaks on “How to heal a divided labor market after the Covid pandemic.”

Economic Data:

  • US housing starts, building permits
  • Eurozone Q1 Preliminary GDP
  • UK jobless claims, ILO unemployment
  • Hungary GDP
  • Japan tertiary industry index
  • Japan GDP
  • Italy trade balance
  • Australia ANZ Roy Morgan consumer confidence, RBA minutes of May policy meeting
  • New Zealand non resident bond holdings
  • Netherlands consumer spending

Wednesday, May 19

  • ECB Executive Board member Panetta and Governing Council member Rehn speak at the Finnish Payments Forum.
  • ECB Chief Economist Lane speaks at the Dublin Climate Dialogues.
  • The Official Monetary and Financial Institutions Forum holds a fireside chat with St. Louis Fed President Bullard.
  • Atlanta Fed President Bostic is interviewed during a Businessweek/Bloomberg Live event.
  • President Biden speaks at the US Coast Guard Academy commencement in Connecticut.

Economic Data/Events:

  • FOMC minutes
  • ECB Financial Stability Review published
  • Australia Westpac consumer confidence, wage price index
  • Canada CPI
  • Eurozone CPI
  • UK CPI
  • South Africa CPI
  • New Zealand PPI
  • Japan industrial production, capacity utilization
  • Russia industrial production
  • Singapore GDP
  • South Africa retail sales
  • EIA Crude Oil Inventory Report

Thursday, May 20

  • U.S. Commerce Secretary Raimondo holds a summit to discuss the global semiconductor shortage. Google, Amazon, Samsung and TSMC may attend.
  • IMF Managing Director Georgieva and ECB President Lagarde speak at the Vienna Economic Dialogue.
  • ECB President Lagarde, Governing Council member Holzmann and IMF Managing Director Georgieva speak at a conference on “Gender, Money and Finance.”
  • ECB Chief Economist Lane and Eurogroup President Donohoe speaks in a webinar discussion on Europe and the global economy.
  • Riksbank First Deputy Governor Skingsley speaks at a Skandinaviska Enskilda Banken event.
  • Riksbank Deputy Governor Breman participates in a panel
  • Bank of Canada Governor Macklem holds a press conference to discuss the contents of the Bank’s Review
  • Debate with three candidates to become next German Chancellor

Economic Data:

  • US initial jobless claims, leading index
  • Australia unemployment rate, employment change
  • Japan trade balance, core machine orders
  • China loan prime rates
  • South Africa Rate Decision: Expected to keep rates steady at 3.50%
  • Hungary Central Bank Rate Decision: Expected to keep one-week deposit rate unchanged at 0.75%

Friday, May 21

  • President Biden meets South Korean President Moon Jae-in at the White House
  • Fed Presidents Bostic (Atlanta), Kaplan (Dallas) and Barkin (Richmond) to speak at the Dallas Fed Technology Conference.
  • Euro-area finance ministers and central bank chiefs meet. A larger group of EU finance ministers and central bank chiefs will meet May 22.
  • Italy and the European Commission co-host the G-20 Global Health Summit in Rome.

Economic Data:

  • US May Preliminary Manufacturing PMI: 60.8e v 60.5 prior; Apr Existing home sales: 6.06Me v 6.01M prior
  • Eurozone Flash PMI readings, Consumer confidence
  • UK Manufacturing PMI
  • UK Retail Sales
  • Australia Manufacturing PMI, Retail Sales
  • Mexico Retail Sales
  • New Zealand credit card spending
  • Thailand trade, foreign reserves
  • Japan CPI, PMI data
  • Baker Hughes rig count

Sovereign Rating Updates:

  • Switzerland (Fitch)
  • South Africa (S&P)
  • Greece (Moody’s)
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