HomeContributorsFundamental AnalysisBond Yield Inching Higher Following Fed's Transitory U-Turn

Bond Yield Inching Higher Following Fed’s Transitory U-Turn


  • Transitory u-turn on inflation by Powell; increased concerns over inflation risks going forward; appeared to dismiss concerns about the new omicron Covid-19 variant.
  • Major European PMI Manufacturing readings remain former in expansion territory (Beats: France, Italy; Misses: Euro Zone, Germany, Spain, UK).
  • Turkish Lira currency appreciated over 7% after CBRT intervened in FX market.


  • China Nov Caixin PMI Manufacturing registered its 1st contraction in 3 months (49.9 v 50.5e).
  • Japan Nov Final PMI Manufacturing: 54.5 v 54.2 prelim (confirms10th consecutive expansion and highest since Jan 2018).
  • Australia Q3 GDP beat expectation and shrugs of Delta lockdown (Q/Q: -1.9% v -2.5%e; Y/Y: 3.9% v 3.0%e).
  • BOJ Board Member Adachi noted that now that the COVID-19 situation had started to calm down, firms were gradually beginning to raise the prices of their goods and services. BOJ to scrutinize COVID developments and impact on corporate finance in deciding fate of pandemic relief loan programs.


  • NIH’s Fauci: Preliminary information from South Africa suggested no unusual symptoms associated with Omicron.
  • Biden administration said to be preparing stricter testing requirements for all travelers entering the US. Everyone entering the country to be tested one day before boarding flights and considering travelers get retested within 3 to 5 days after arrival.


  • Incoming German Chancellor Scholz stated that should not aim for inflation as high as we have now, if inflation did not ease, action must be taken. Would not tolerate high inflation rates over the long run, price developments must be very closely monitored.


  • Fed Chair Powell testimony in House noted it was appropriate to consider wrapping up taper a few months sooner, To talk about speeding up taper at next FOMC meeting. Stated that now was a good time to retire the ‘transitory’ term regarding inflation.
  • Fed Vice Chair Clarida: Fed pandemic actions are aimed at stemming financial panic. Getting actual inflation down close to 2% will be important part of keeping inflation expectations anchored.


  • Weekly API Crude Oil Inventories: -0.7M v +2.3M prior.

Speakers/Fixed income/FX/Commodities/Erratum


  • Indices [Stoxx600 +1.03% at 467.74, FTSE +1.30% at 7,151.10, DAX +1.47% at 15,321.79, CAC-40 +1.23% at 6,804.13, IBEX-35 +1.51% at 8,430.43, FTSE MIB +1.50% at 26,202.00, SMI +0.39% at 12,207.42, S&P 500 Futures +1.23%].

Market Focal Points/Key Themes:


  • European indices open sharply higher across the board amid partial easing of concerns regarding new Omicron variant; better performing sectors include consumer discretionary, energy and technology; while utilities is among underperforming sectors; on corporate front, German real estate firm Adler announced disposal of its €800M property portfolio and trades higher over 20% in Frankfurt; elsewhere, Drax Group also trading higher on LSE following trading and CMD updates; on M&A front, SS&C Technologies raises offer for UK-based Blue Prism Group, while CVC Capital announced it is no longer in talks to acquire Intertrust; earnings expected during the upcoming US session include G-III Apparel, Royal Bank of Canada before market opens and CrowdStrike, Snowflake after US close.
  • Consumer discretionary: Intertrust [INTER.NL] -5% (no longer in discussions with CVC).
  • Energy: Drax Group [DRX.UK] +6% (trading update; CMD), Royal Dutch Shell [RDSA.NL] +3% (oil price bounce).
  • Technology: Blue Prism Group [PRSM.UK] +2% (SS&C raises offer).
  • Real Estate: Adler [ADJ.DE] +22% (divestment).


  • Spain Econ Min Calvino stated that the inflation situation in EU was different compared to US; reiterated that price rise in Europe was seen as transitory.
  • Poland Central Bank (NBP) Gov Glapinski stated that it had room for interest rates hikes but space was not unlimited.
  • Turkey Central Bank (CBRT) intervened in the FX market citing unhealthy price formations in the exchange rate.
  • Turkey President Erdogan reiterated stance that could never be in favor of high interest rates. Understood public concerns over the volatility in exchange rates. Had abandoned monetary policy based upon high rates but conceded that the new path could be risky but correct. Exchange rates were expected to stabilize soon.
  • Israel Health Min Horowitz stated that the were first indications that individuals fully vaccinated against COVID-19 within 6 months or with the booster were protected against the Omicron variant.
  • Belarus President Lukashenko reiterated threat to suspend Russian energy transport if Poland closed the migrant border.

Currencies/Fixed Income

  • USD remained on firm footing following hawkish comments by Fed Chair Powell on Tuesday which spurred expectations of faster policy tightening and renewed focus on yield differentials. The Fed Chair noted that elevated inflation pressures and rapid improvements in the labor market would justify wrapping up the taper by perhaps a few months sooner. Dealers noted that the overall USD trend based on rate differentials would be dependent on how the Omicron variant of coronavirus developed
  • EUR/USD drifted lower in the session to reapproach the 1.1300 level before consolidating.
  • USD/JPY back above 113.50 aided by the yield differentials.
  • TRY currency (Lira) hit fresh record lows near the 14 handle before the Turkey Central Bank (CBRT) intervened in the FX market citing unhealthy price formations in the exchange rate. Lira gained over 7.5% afterwards to retest below the 12.45 level. Lira retarced its gains after President Erdogan reiterated his stance that could never be in favor of high interest rates.

Economic data

  • (RU) Russia Nov PMI Manufacturing: 51.7 v 51.6 prior (2nd straight expansion).
  • (DE) Germany Oct Retail Sales M/M: -0.3% v +0.9%e; Y/Y: -4.1% v -1.7%e.
  • (UK) Nov Nationwide House Price M/M: 0.9% v 0.4%e; Y/Y: 10.0% v 9.3%e.
  • (TR) Turkey Nov PMI Manufacturing: 52.0 v 51.2 prior (6th month of expansion).
  • (NO) Norway Q3 Current Account Balance (NOK): 157.9B v 114.7B prior.
  • (CH) Swiss Nov CPI M/M: 0.0% v -0.1%e; Y/Y: 1.5% v 1.4%e; CPI Core Y/Y: 0.7% v 0.7%e.
  • (CH) Swiss Nov CPI EU Harmonized M/M: -0.1% v +0.4% prior; Y/Y: 1.5% v 1.3% prior.
  • (SE) Sweden Nov PMI Manufacturing: 63.3 v 64.2 prior (18th month of expansion).
  • (TH) Thailand Nov Business Sentiment Index: 48.4 v 47.0 prior.
  • (NL) Netherlands Nov Manufacturing PMI: 60.7 v 61.3e (16th straight expansion).
  • (PL) Poland Nov PMI Manufacturing: 54.4 v 53.9e (17th straight expansion).
  • (HU) Hungary Nov Manufacturing PMI: 52.2 v 53.4e (8th straight expansion).
  • (HU) Hungary Q3 Final GDP Q/Q: 0.7% v 0.7% prelim; Y/Y: 6.1% v 6.1% prelim.
  • (HU) Hungary PPI M/M: 4.5% v 2.4% prior; Y/Y: 18.5% v 14.0% prior.
  • (ES) Spain Nov Manufacturing PMI: 57.1 v 57.9e (10th month of expansion).
  • (CH) Swiss Nov PMI Manufacturing: 62.5 v 64.2e (16th straight expansion).
  • (CZ) Czech Republic Nov PMI Manufacturing: 57.1 v 55.5e (15th straight expansion).
  • (IT) Italy Nov Manufacturing PMI: 62.8 v 61.1e (17th month of expansion and record high).
  • (NG) Nigeria Nov PMI Manufacturing: 55.0 v 54.1 prior.
  • (FR) France Nov Final Manufacturing PMI: 55.9 v 54.6 prelim (confirmed 12th month of expansion).
  • (DE) Germany Nov Final Manufacturing PMI: 57.4 v 57.6 prelim (confirmed 17th month of expansion but lowest since Jan).
  • (EU) Euro Zone Nov Final Manufacturing PMI: 58.4 v 58.6 prelim (confirmed 17th month of expansion).
  • (GR) Greece Nov Manufacturing PMI: 58.8 v 58.9 prior (9th month of expansion).
  • (NO) Norway Nov PMI Manufacturing: 63.7 v 58.0e (15th month of expansion).
  • (ZA) South Africa Nov Manufacturing PMI: 57.2 v 53.3e (4th month of expansion).
  • (IS) Iceland Q3 Current Account Balance (ISK): +13.1B v -36.9B prior.
  • (UK) Nov Final Manufacturing PMI: 58.1 v 58.2e(confirmed 18th month of expansion).
  • (DK) Denmark Nov PMI Survey: 68.2 v 72.2 prior (9th straight expansion).

Fixed income Issuance

  • (IN) India sold total INR200B vs. INR200B indicated in 3-month, 6-month and 12-month bills.
  • (SE) Sweden sold total SEK2.5B vs. SEK2.5B indicated in 2029 and 2032 bonds.
  • (UK) DMO sold £2.25B in new 1.0% Jan 2032 Gilts; Avg Yield: 0.918% v 1.144% prior; bid-to-cover“ 2.23x (lowest since Mar 2020) v 2.65x prior; Tail: 1.9bps v 0.2bps prior.

Looking Ahead

  • OPEC JMMC meeting.
  • (AR) Argentina Nov Government Tax Revenue (ARS): No est v 1.019T prior.
  • (ZA) South Africa Nov Naamsa Vehicle Sales Y/Y: No est v 6.1% prior.
  • (IT) Italy Nov Budget Balance: No est v -€7.5B prior.
  • (US) Nov Total Vehicle Sales data.
  • 05:25 (EU) Daily ECB Liquidity Stats.
  • 05:30 (DE) Germany to sell €3.0B in 0% Oct 2026 BOBL.
  • 05:30 (GR) Greece Debt Agency (PDMA) to sell €625M in 26-week Bills; Avg Yield: % v -0.41% prior; Bid to cover: x v 1.83x prior (Oct 26th 2021).
  • 06:00 (IE) Ireland Nov Unemployment Rate: No est v 5.2% prior.
  • 06:00 (EU) EU Commission to sell combined €3.0B in 3-month and 6-month Bills.
  • 06:30 (CL) Chile Oct Economic Activity Index (Monthly GDP) Y/Y: 15.0%e v 15.6% prior.
  • 06:45 (US) Daily Libor Fixing.
  • 07:00 (RU) Russia to sell combined RUB30.1B in 2031 and 2032 OFZ Bonds.
  • 07:00 (US) MBA Mortgage Applications w/e Nov 26th: No est v 1.8% prior.
  • 07:00 (UK) Weekly PM Question time in House.
  • 08:00 (HU) Hungary Central Bank Nov Minutes.
  • 08:00 (CZ) Czech Nov Budget Balance (CZK): No est v -335.0B prior.
  • 08:00 (BR) Brazil Nov PMI Manufacturing: No est v 51.7 prior.
  • 08:00 (UK) Daily Baltic Dry Bulk Index.
  • 08:15 (US) Nov ADP Employment Change: +525Ke v +571K prior.
  • 08:30 (CA) Canada Oct MLI Leading Indicator M/M: No est v 0.7% prior.
  • 08:30 (CA) Canada Oct Building Permits M/M: -1.0%e v +4.3% prior.
  • 09:00 (UK) BOE Gov Bailey.
  • 09:00 (SE) Sweden Central Bank (Riksbank) Breman.
  • 09:30 (CA) Canada Nov Manufacturing PMI: No est v 57.7 prior.
  • 09:45 (US) Nov Final Markit Manufacturing PMI: 59.1e v 59.1 prelim.
  • 09:45 (UK) BOE to buy £1.47B in APF Gilt purchase operation (7-20 years).
  • 10:00 (US) Nov ISM Manufacturing: 61.2e v 60.8 prior; Prices Paid: 85.5e v 85.7 prior.
  • 10:00 (US) Oct Construction Spending M/M: +0.4%e v -0.5% prior.
  • 10:00 (MX) Mexico Oct Total Remittances: $4.6Be v $4.4B prior.
  • 10:00 (MX) Mexico Central Bank Economist Survey.
  • 10:00 (CO) Colombia Nov PMI Manufacturing: No est v 54.0 prior.
  • 10:00 (PE) Peru Nov CPI M/M: 0.3%e v 0.6% prior; Y/Y: 5.6%e v 5.8% prior.
  • 10:00 (US) Fed chief Powell and Treasury Sec Yellen testify in House.
  • 10:30 (MX) Mexico Nov PMI Manufacturing: No est v 49.3 prior.
  • 10:30 (US) Weekly DOE Oil Inventories.
  • 12:00 (IT) Italy Nov New Car Registrations Y/Y: No ext v -35.7% prior.
  • 13:00 (BR) Brazil Nov Trade Balance: -$1.3Be v $2.0B prior; Total Exports: $21.8Be v $22.5B prior; Total Imports: $23.3Be v $20.5B prior.
  • 13:00 (MX) Mexico Nov IMEF Manufacturing Index: 51.0e v 50.7 prior; Non-Manufacturing Index: 52.5e v 52.1 prior.
  • 13:00 (MX) Mexico Central Bank (Banxico) Quarterly Inflation Report (QIR).
  • 14:00 (US) Federal Reserve Beige Book.
  • 16:45 (NZ) New Zealand Q3 Terms of Trade Index Q/Q: 2.0%e v 3.3% prior.
  • 18:00 (KR) South Korea Q3 Final GDP Q/Q: 0.3%e v 0.3% prelim; Y/Y: 4.0%e v 4.0% prelim.
  • 18:00 (KR) South Korea Nov CPI M/M: -0.2%e v +0.1% prior; Y/Y: 3.1%e v 3.2% prior; CPI Core Y/Y: 2.2%e v 2.8% prior.
  • 18:50 (JP) Japan end-Nov Monetary Base: No est v ¥664.0T prior.
  • 19:30 (AU) Australia Oct Trade Balance: A$11.2Be v A$12.2B prior; Exports M/M: -1%e v -6% prior; Imports M/M: +2%e v -2% prior.
  • 19:30 (AU) Australia Oct Home Loans Value M/M: +1.5%e v -1.4% prior.


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