- European government bonds are currently trading lower in the session on the back of an unwinding in safe haven flows. In new supply overnight the French Tresor sold €2.1B in 3.75% April 2017 OATs with an average yield of 4.67% and a bid-to-cover of 3.56x. The bid-to-cover compared to the 2.19x seen at the previous auction. The auction brought the current amount outstanding for this issue to €19.55B. The Tresor also sold €1.54B in 4.25% October 2023 OATs with an average yield of 4.78% and a bid to cover of 2.84x. The bid-to-cover compared to the 2.34x seen at the previous auction. The auction brought the amount outstanding for this issue to €6.01B. Over in the UK gilts are also trading lower in the session ahead of today’s interest rate decision; the BOE is widely expected to raise rates by 25 basis points.
- The session was light on the data front. The only economic release came out of Spain, and showed that May industrial output declined by more than expected to 2.4% on both an adjusted and unadjusted basis. The decline comes as rising rates along with the economic slowdown in the US have weakened demand.
- The German Economic Minister reaffirmed the MOF’s 2007 GDP growth forecast of 2.3%. The Economic Minister also forecasted unemployment below 3.5M be the end of 2008, noting that he was not concerned about the lack of skilled workers.
- The German chemical minister VCI raised its 2007 sales growth forecast to 7.5% overnight from the previous forecast of 4.5%, and said that prices are seen rising by 2.0%, up from the previous forecast of 1.5%.
- The Bank of England is due to announce their interest rate decision at 7:00 ET and is widely expected to raise interest rates by 25 basis points. Despite strong expectations for a rate hike, some market participants still see a chance that the BOE will keep rates on hold. At 7:45 ET the ECB is due to announce their interest rates decision. The ECB is expected to keep rates on hold at 4.00%. The main focus for the ECB is likely to rest more upon comments made by the ECB’s Trichet made at the regular 8:30 ET post-rate announcement conference rather than the actual rate announcement.
- The session was light on the data front. The only economic release came out of Spain, and showed that May industrial output declined by more than expected to 2.4% on both an adjusted and unadjusted basis. The decline comes as rising rates along with the economic slowdown in the US have weakened demand.
- The German Economic Minister reaffirmed the MOF’s 2007 GDP growth forecast of 2.3%. The Economic Minister also forecasted unemployment below 3.5M be the end of 2008, noting that he was not concerned about the lack of skilled workers.
- The German chemical minister VCI raised its 2007 sales growth forecast to 7.5% overnight from the previous forecast of 4.5%, and said that prices are seen rising by 2.0%, up from the previous forecast of 1.5%.
- The Bank of England is due to announce their interest rate decision at 7:00 ET and is widely expected to raise interest rates by 25 basis points. Despite strong expectations for a rate hike, some market participants still see a chance that the BOE will keep rates on hold. At 7:45 ET the ECB is due to announce their interest rates decision. The ECB is expected to keep rates on hold at 4.00%. The main focus for the ECB is likely to rest more upon comments made by the ECB’s Trichet made at the regular 8:30 ET post-rate announcement conference rather than the actual rate announcement.