HomeContributorsFundamental AnalysisUS Fixed Income Markets Are Also Losing Some Momentum

US Fixed Income Markets Are Also Losing Some Momentum

Market movers today

It is a fairly thin data calendar today.

In the US, we are due to get Conference Board Consumer Confidence for March. The preliminary numbers from the University of Michigan for March indicate that consumer confidence remained at a very high level in March and we expect the Conference Board figures to confirm this impression. Hence, we estimate the March Conference Board figure will be 114.0.

Selected market news

Global risk sentiment improved after the sell-off prompted by the failure by the US Congress to pass legislation to repeal Obamacare. This morning, most Asian indices are rebounding in line with the recovery in US stocks yesterday. US Fixed income markets are also losing some momentum after the rally since mid-March. Equity markets appear to have taken comfort in the fact that less aggressive fiscal policies in the US may prompt weaker inflation pressures, which will allow the Federal Reserve to refrain from hiking rates as much as it has indicated. Yesterday, Fed Bank of Chicago President Charles Evans said that two hikes may be the right amount of tightening for the US economy this year, given the uncertainty surrounding the outlook for inflation and government spending.

Ahead of the expected triggering of Article 50 by the UK government this week, tension is already growing between the EU and the UK government. UK Brexit Secretary David Davis said that Britain will pay ‘nothing like’ the sums of money European Union officials have floated as needing to be paid when the UK leaves. Over the weekend, EU commission president Jean- Claude Juncker said the UK will be expected to pay around GBP50bn (covering liabilities such as pensions for EU officials, infrastructure projects and the bail-out of Ireland). The UK side is rebuking such figures as there has been ‘no explanation’ for the amount.

In South Africa, political risk premia flared up again after Finance Minister Pravin Gordhan was called back from an investor road trip to London by President Jacob Zuma. This prompted speculation that Gordhan will be replaced as Finance Minister by Brian Molefe, a relatively new member of parliament. Molefe has sat on the boards of some of South Africa’s biggest stateowned enterprises and has also worked at the Treasury. We think the markets will see him as a weaker minister than Gordhan if he is appointed to the role. As a result, the USD/ZAR shot up by 2% yesterday when the news broke. We think that the ZAR could weaken by more in the coming days if the stories take hold.

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