Market movers today
A quiet day in terms of macro data. Consumer confidence figures will be released from Germany, Sweden and the US conference board. US November home sales are also due for release in the afternoon, and leading indicators point towards a further decline.
The Czech National Bank is expected to maintain its policy rate unchanged in its meeting today.
The 60 second overview
The global financial markets continue to be affected by the surprise move by Bank of Japan. This morning 10Y JGBs is up some 6-7bp and 2Y JGBs is trading at 0bp. Bank of Japan has announced that they will do “unscheduled buying” of JGBs this afternoon, where they will buy in the 3Y-5Y segment and 5Y to 10Y segment. This morning, 10Y US Treasuries is only up a few bp in Asian trade after jumping almost 10bp yesterday.
The yen have stabilised versus the dollar this morning after the solid strengthening yesterday, where it strengthened almost 4% against the dollar. There was only a modest widening of European credit spreads and the BTPS-Bund spread remained stable despite the significant rise in government bond yields. French government bonds underperformed German government bonds with a few bp in the long end of the curve. However, the French bonds is seen as being one of the markets that can come under pressure if the Japanese continue the repatriation that has been going during 2022.
Part of the big moves we have seen in financial markets after both ECB and BoJ can also be attributed to the usual poor liquidity at this time of the year. 10Y Bunds has risen more than 30bp since Thursday last week.
FI: Heading into the final stretch of the year, markets were surprised by the BoJ’s decision to widen the tolerance band of its YCC to 0.5%. This became the market theme through the day which dragged global yields higher. German yields ended almost 10bp higher at 2.29%, while intra-euro area spreads was broadly unchanged on the day. Japanese
FX: Yesterday’s session was all about the Bank of Japan surprise with USD/JPY falling as much as 5% before marking a slight rebound in the US session returning the cross north of 131. While this leaves real duration shock risk in FX markets when looking into 2023 the moves among Majors was relatively muted in yesterday’s session.
Credit: The credit markets remained rather subdued yesterday with very limited primary activity. With activity also being low in the secondary markets, spreads widened marginally, only to stage a modest recovery at the end of the day. ITraxx Main was some 0.1bp wider to 98.7bp and Xover was 5.3bp wider to 506.3bp.
Nordic macro: In Sweden, the December confidence survey is released this morning (09.00 CET). All business sectors except manufacturing is already below the long-tern average 100 level and seems most likely to continue even lower. Consumer confidence has bounced off 30-year lows. Hiring expectations is falling in all sectors and consumers anticipate an increasing risk of personally losing their jobs . Despite this deteriorating outlook, prices expectations remain extremely high, especially in retail trade.
NIER also releases a new macro forecast (09.15 CET). We suspect it will paint a weak economic outlook for the year to come.