market movers today
Today’s calendar is a bit thin.
In the US, the NFIB Small Business Survey is quite interesting, not least sub-component, which provides information about the labor market and underlying inflationary pressures. We hope the survey will reveal that the labor market remains tight, with many businesses struggling to find qualified workers and expecting higher wage growth. Also, businesses are likely to report that most consumers expect a price increase.
The US Senate Banking Committee is hearing the nomination of Fed Chair Powell. We expect Powell to be approved without too many problems, as he enjoys overall support from most Democrats and Republicans, despite some criticism from both left-wing Democrats and right-wing Republicans.
Also focus on the still growing geopolitical tension between Russia and US/Europe/NATO.
60 second overview
US-Russia talks Monday ended on a cautiously optimistic tone, pushing the RUB higher. As expected, no settlement was reached, but both sides agreed to continue talks. The US representative, Deputy Secretary of State Wendy Sherman, said any major breakthrough would take weeks if not more. He also said the US stands ready to discuss the size and scope of future military exercises as well as the status of medium-range missile systems in Europe. The US previously reported that Russia’s demand for NATO not to expand further east is a non-starter. However, Russia reiterated its demands in this regard, while also emphasizing that NATO should never allow Ukraine or other ex-Soviet states to join the alliance. The stakes are high, with Russia deploying more than 100,000 troops to the Ukraine border and the prospect of massive economic sanctions against Russia in response to a possible attack. Now the focus is on Brussels, where Russia is due to meet representatives of NATO on Wednesday and Vienna on Thursday for discussions under the OSCE framework.
Euro Macro: The number of unemployed people in the euro area fell to 220,000 in November, reducing the unemployment rate to 7.2%, within its record low in March 2020 when the pandemic hit. While the recovery in the labor market remains a bright spot, the triple headwind of new COVID-19 restrictions, ongoing supply constraints and declining real household incomes are increasingly weighing on euro area macro momentum, as we look at the Euro Area Macro Monitor. Let’s discuss in – Triple Headwind, Jan 10.
Happen: Yields and spreads fluctuated marginally after the sell-off that started in mid-December. The 10Y US Treasury and 10Y Bund have risen approx since mid-December. 35bp. The German and US curves have stabilized between 2Y and 10Y, while the 10-30Y has flattened in the US and the German curve was more or less unchanged since mid-December. The longer trend is still for a flatter curve as central banks tighten monetary policy.
FX: USD, JPY and GBP edged higher yesterday against Scandi’s and CHF. Big moves were made on Monday with EUR/USD taking a brief drop below 1.13 as one of the highlights.
Credit: Spreads in the secondary markets continued their broader trend yesterday. We see this as a result of continued rising rates, but also as a result of an aggressive start to the primary printing season. Yesterday the market hit a flurry of new deal announcements, which include TotalEnergies’ hybrid bonds (i.e. the first call from 5.25 years that was fixed at 2%). This focus on the primary market drove liquidity away from the secondary market, causing iTraxx Main to widen from 1.2bp to 51.6bp and Xover from 4.5bp to 254.4bp. In cash, the move was more muted, with IG 0.5bp wide and HY wide by 1.9bp.
The Swedish Debt Office (SNDO) will present its monthly report on the central government’s revenue and net result of payments (net borrowing requirement) for the month of December. The forecast is for a positive borrowing requirement (budget deficit) of SEK 91.5bn. However, the two months after the latest forecast (October) have yielded a total surplus (compared to the above forecast) of about SEK 40bn, and the figure is even higher for the full year, so we are surprised to see today’s figure. Won’t happen. that trend.