21 February 2017. Daily Market Updates

Headlines – International
  • Markets across the continent have started to price in the increased potential for anti-euro candidates to win elections in France and Italy. Recent positioning in German and Italian bonds are hedges against a blow-up in the risk of a breakup in the common currency, said traders in London and New York. Six-month German securities have rallied more than benchmark tenors this month and open interest in two-year note futures has surged, suggesting investors are building up long positions in assets that are the closest to cash in terms of safety. The yield spread between Italian low- and high-coupon bonds has widened as traders bet against the latter, which would fall much more if the country’s creditworthiness is called into question.

  • Treasury market signals Jury still out on Trump reflation trade. A gauge of inflation expectations used by the central bank to help guide policy was about 2 percent, holding below its average over the last decade of about 2.5 percent. The five-year, five-year forward break-even rate, which project the pace consumer prices will increase from 2022 to 2027, is struggling to climb too far from its record low set last year.

  • Euro consumer mood weakens as oil pices advances. Consumer confidence deteriorated a bit in February, following several months of improvement. Still, levels remain safely above their long-term averages. While rising oil prices might have tempered the mood of households, better labor market conditions continue to provide strong support.

Regards All.



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