13 Jan 2015
Bonds: Bunds consolidating, Keep an eye on Greek Bonds – KBC
FXStreet (Barcelona) - The KBC Market Research Desk shares the performance of Bonds, noting that bunds are in consolidation mode, further adding that overnight ECB’s remarks that Greece would be cut off emergency liquidity funding might weigh on Greek bonds today.
Key Quotes
“Yesterday, global core bonds had a slow start to the trading week, but they found their vigour back during the afternoon session. It was once more linked to declining oil prices and crumbling equities (later on).”
“The stronger US 3-year Note auction helped Treasuries even higher later in the session. It is declining inflation and fear for deflation that drives core bonds? In a daily perspective, US yields fell by 1.6 (2-yr) to 3.9 bps (belly), outperforming German Bunds that are in consolidation mode and saw a mixed change of the curve: marginally higher 2- and 5-yr yields and modest 1.4 to 3.3 bps decline of the 10 and 30s yields. Uncertainties surrounding the (key) details of the QE seems to keep German Bunds in a consolidation mode.”
“On intra-EMU bond markets, peripheral spreads narrow up to 8 bps with a Greek outperformance (-65 bps). Overnight, the ECB insisted that Greece would be cut off emergency liquidity funding if they have no programme, pushing Greek banks off the cliff. This could weigh on Greek bonds today. One should see these remarks in the context of the upcoming elections. Such a programme might be difficult for Syrizia that leads in the polls. However, one shouldn’t be hasty taking conclusions during an election campaign.”
Key Quotes
“Yesterday, global core bonds had a slow start to the trading week, but they found their vigour back during the afternoon session. It was once more linked to declining oil prices and crumbling equities (later on).”
“The stronger US 3-year Note auction helped Treasuries even higher later in the session. It is declining inflation and fear for deflation that drives core bonds? In a daily perspective, US yields fell by 1.6 (2-yr) to 3.9 bps (belly), outperforming German Bunds that are in consolidation mode and saw a mixed change of the curve: marginally higher 2- and 5-yr yields and modest 1.4 to 3.3 bps decline of the 10 and 30s yields. Uncertainties surrounding the (key) details of the QE seems to keep German Bunds in a consolidation mode.”
“On intra-EMU bond markets, peripheral spreads narrow up to 8 bps with a Greek outperformance (-65 bps). Overnight, the ECB insisted that Greece would be cut off emergency liquidity funding if they have no programme, pushing Greek banks off the cliff. This could weigh on Greek bonds today. One should see these remarks in the context of the upcoming elections. Such a programme might be difficult for Syrizia that leads in the polls. However, one shouldn’t be hasty taking conclusions during an election campaign.”