Fixed income

The €nd?

16 May 2012 | Anders Svendsen

New elections have been called in Greece and so we look at the timeline of what might happen in the coming months and the consequences if a solution to Greece's problems is not found.

Is Bernanke already a lame duck?

16 May 2012 | Johnny Bo Jakobsen

Fed chairman Bernanke may effectively already be a lame duck as he is likely to step down in early 2014 and his dovish views appear to be increasingly isolated within the organisation. This could be a huge issue going forward.

ECB intervention looming

16 May 2012 | Jan von Gerich

With market strains increasing rapidly, the ECB remains the one with the capacity to react fast. After the ECB has acted first to try to bring some calmness to markets, something could happen on the government front as well.

Go for pick-up via maturity extensions in Monday's Finnish bond auction

11 May 2012 | Jan von Gerich

State Treasury Finland will re-open RFGB 1.875% Apr 2017 on Monday, 14 May 2012. With short rates virtually at zero, the search for pick-up in definitely on. We find maturity extensions from shorter German, Dutch and Finnish bonds into the 5-year Finnish auction bond attractive.

Signs of a higher NAIRU ignored by the Fed, for now

11 May 2012 | Johnny Bo Jakobsen

Probably the most important debate on US monetary policy is whether there really is an aggregate demand shortfall, and as a result, a negative output gap. If the answer is yes, then the Fed should continue supporting the economy. If the answer is no, monetary policy should soon be tightened.

Thoughts on the Riksbank's new bond portfolio

11 May 2012 | Mats Hydén

Yesterday the Riksbank announced that it will launch a 10 bn SEK bond portfolio. When looking through the details, some interesting conclusions can be drawn...

Norges Bank: No significant change in view

10 May 2012 | Erik Bruce

Norges Bank therefore concludes that it has not changed view on interest rates significantly

Euro-zone debt worries continuing to push German yields to new lows

10 May 2012 | Jan von Gerich

With German bonds enjoying strong momentum, yields could fall even further. The pricing of a risk of some sort of a Euro-zone break-up will likely increase on the back of the Greek situation, while the Spanish situation continues to be another source of uncertainty.

Sharply lower inflation- air fares again

9 May 2012 | Erik Bruce

April inflation will not influence the rate deci-sion. But a reading differing strongly from Norges Bank’s forecast could have an im-pact on the wording at the press conference.

No change, perhaps a bit more optimistic?

8 May 2012 | Erik Bruce

Unchanged interest rates are fully discounted and the signals from Norges Bank will de-termine whether we will see any reactions from the market.

Greek political uncertainty

7 May 2012 | Anders Svendsen

With 99% of the votes from Sunday’s general elections counted, the two “big” parties – the conservative New Democracy and the socialist PASOK – won 149 seats in the 300-seat parliament and hence lack two seats to form a majority coalition.

Weak US jobs report, but not bad enough to force the Fed's hand

4 May 2012 | Johnny Bo Jakobsen

While the soft April employment numbers leave the door open for further monetary easing, the report isn’t bad enough to force the Fed to announce QE3 at the 19-20 June FOMC meeting.

Norway: Norges Bank to hike in October

3 May 2012 | Katrine Boye

Our latest update on Norges Bank, NOK rates and FX.

NEMO: Europe heats up over the Summer

3 May 2012 | Steen Grøndahl

Our latest take on Nordic and Global financial markets and economies.

The US: one swallow doesn’t make a summer

3 May 2012 | Johnny Bo Jakobsen

While QE3 is still expected to be announced in June, too little Fed tightening is priced in longer out.

Italian and Spanish yields jumping despite buying from domestic banks

30 Apr 2012 | Jan von Gerich

Italian and Spanish bond yields rose notably in March despite continued support from domestic banks. This does not bode well for the future, as the pace of purchases by banks is not at least set to increase.

Correction due, but next week’s data to feed the bond rally

27 Apr 2012 | Jan von Gerich

Bond markets appear due for a correction, but we expect next week’s events and economic data only to add to the gloomy sentiment.

Credit ratings back in the spotlight

27 Apr 2012 | Jan von Gerich

Yesterday’s move by Standard & Poor’s to downgrade Spain’s rating by two notches brought rating news back to the spotlight. More downgrades are likely in store, as austerity measures bite amidst an uncertain economic outlook.

The fall of the Dutch government another setback for the Euro zone

23 Apr 2012 | Jan von Gerich

The fall of the Dutch government illustrates how hard introducing austerity measures is in the core countries as well. If even the core countries show reluctance to meet the budget limits set by the EU, bringing back confidence towards the currency union and its rules is certainly not going to succeed.

The Fed to offer little ammo to bond bulls

20 Apr 2012 | Jan von Gerich

Next week’s calendar looks quite interesting, with the main focus in the US on the 2-day Fed meeting concluding on Wednesday.

New French President may be less focused on budget discipline

19 Apr 2012 | Anders Svendsen

Presidential elections due on 22 April and 6 May. Conservative Sarkozy and Socialist Hollande are neck to neck for the first round, while Hollande looks like a winner for the run-off.

Successful Spanish bond auctions not taking away the pressure

19 Apr 2012 | Jan von Gerich

Today’s Spanish bond auctions received, again, more attention than probably warranted as the results do not really tell us that much new about the underlying demand.

The firewall never going to be big enough to work on its own

18 Apr 2012 | Jan von Gerich

The G20 finance ministers will likely agree on increasing the resources of the IMF later this week. Such a decision, though not insignificant, is unlikely to change the course for markets.

Spanish T-bill results not a reason for big cheer

17 Apr 2012 | Jan von Gerich

The significance of today's successful Spanish T-bill sale should not be overplayed. The auction size was rather modest, though Spain did pay less for its 1-year funding compared to Italy last week. Thursday’s bond auctions will be more interesting.

Minor changes to financial forecasts

16 Apr 2012 | Anders Svendsen

We see rates continuing lower in the coming months and the EUR/USD unchanged around the current levels.

Spanish banks well-prepared for upcoming redemptions

16 Apr 2012 | Jan von Gerich

Most news stories only report the jump in overall central bank borrowing by Spanish banks in March, but miss the increase in funds Spanish banks have in reserve to meet future funding needs. The funding position of Spanish banks – like that of the Spanish sovereign – is actually relatively good at the moment.

Fed View: QE3 is still on the table, despite no signals from the Fed

13 Apr 2012 | Johnny Bo Jakobsen

Although Fed officials continue to signal no imminent QE, I still expect QE3 to be announced in June.

A lot on the calendar next week, but positive surprises still scarce

13 Apr 2012 | Jan von Gerich

We do not expect next week’s economic data offerings to convey a particularly encouraging message. Here is what we expect from the week ahead.

Italian T-bill yields jump but alarm bells not ringing particularly loud yet

11 Apr 2012 | Jan von Gerich

Even though the recent rise in Italian yields is worrying, the threat of an immediate funding crisis remains limited. Still, the pressure on Italian bonds is likely to continue in the near future.

Liquidity boosting the safest assets again

10 Apr 2012 | Jan von Gerich

The huge liquidity sloshing around is boosting the safest asset classes again, while Spanish and Italian bonds remain under pressure. This is likely to continue, until we see some better economic data again.

Bonds in demand ahead of the long weekend

5 Apr 2012 | Jan von Gerich

Notable flight-to-safety demand has taken place today ahead of the Easter holidays. Even though the drivers are real, one should not over interpret the moves seen on thin markets ahead of a long weekend, with also tomorrow's US employment report creating uncertainty.

Draghi finds discussions about exit strategy premature

4 Apr 2012 | Anders Matzen

Steady as he goes was the keyword for the ECB meeting today. All interest rates were left unchanged and the ECB did not announce any new liquidity operations.

Fed minutes play down the chances of further QE

4 Apr 2012 | Jan von Gerich

Yesterday's Fed minutes sent a signal that the central bank is not tilted towards more quantitative easing any more. Such a message opens more room for espcially longer US Treasury yields to rise from current levels.

Spanish bond yields to continue to rise

4 Apr 2012 | Jan von Gerich

Today’s Spanish auction results further illustrate that the support from the ECB’s 3-year refinancing operations is waning. Spanish yields will likely continue to lurch higher, leading to higher uncertainty about the Euro-zone situation again.

Differences in collateral rules increasing Euro-zone worries

3 Apr 2012 | Jan von Gerich

The differing collateral policies implemented by national Euro-zone central banks put banks in various parts of the Euro-zone in different positions. Such policies increase worries about the cohesion of the Euro zone.

Risk-reward favours 2-5-year flatteners

2 Apr 2012 | Jan von Gerich

The huge amount of excess liquidity in the Euro-zone banking system is still favouring a flatter curve, carry is positive for flatteners, while the curve tends to flatten, when short rates start to rise. The 2-5-year curve should still have flattening potential left.

Spain and Italy still deep in the woods – German bonds to remain supported for now

29 Mar 2012 | Jan von Gerich

Spanish and Italian bond yields are likely to continue to creep higher, as the support from domestic bank buying fades. Such market action will likely increase general worries about the course of the debt crisis, keeping German bonds well-supported.

Italian and Spanish banks continue government bond buying spree in February

28 Mar 2012 | Anders Matzen

Fresh data from the ECB show that Italian and Spanish banks continued to purchase solid amounts of government securities in February. No doubt the ECB’s 3-year LTRO is the main reason behind this move – driving Italian and Spanish yields lower.

ECB bond purchases only a shadow of their former self

27 Mar 2012 | Jan von Gerich

The ECB's bond purchases have been very modest recently. Arguably, bigger purchases would not even have been necessary lately. However, the Securities Markets Programme of the ECB has become more of a blunt weapon also in general, and has less potential to fight the debt crisis, if the need arises again.

More movements within AAA-rated country bond spreads

23 Mar 2012 | Jan von Gerich

The outlook for Dutch bonds looks much more clouded than that for their Finnish counterparts. Whereas Dutch bonds are burdened by political uncertainty, big deficits and another economic recession, Finland is making headway to balance its books.

Greece returns to markets – that did not take so long

20 Mar 2012 | Jan von Gerich

Greece sold EUR 1.3n of 13-week T-bills at a yield of 4.25% today, down from 4.61% in February and the lowest since last May. However, confidence in the country is not about to return.

US yields with more upside potential than EUR ones

20 Mar 2012 | Jan von Gerich

The recent sell-off in bonds has shown little signs of abating. One only needs to look back to the past couple of years to see that yields can see a substantial jump without major changes in central bank policy.

EFSF funding costs close to Belgium

19 Mar 2012 | Jan von Gerich

The main Euro-zone bailout fund launched a new 20-year benchmark at a cost closer to Belgium than France. Such funding levels do not exactly illustrate high confidence in the facility, while the high funding needs of the EFSF will put pressure on its funding costs to increase further going forward.

Italian yields below Spain again – are markets crazy?

15 Mar 2012 | Jan von Gerich

Despite its high debt, the Italian situation actually looks much better compared to Spain on many measures.

Positive Italian auctions supporting the positive sentiment

14 Mar 2012 | Jan von Gerich

Today’s successful Italian bond auctions were another illustration of how the ECB’s 3-year liquidity injections have succeeded in changing the course for the government bond markets.

Also Spain funding itself with rock-bottom rates

23 Feb 2012 | Jan von Gerich

Spain saw its T-bill yields plunge in an auction earlier this week. 3-month bills were sold at an average yield of 0.40%, whereas still in November the corresponding yield was 5.22%.

The ECB’s second 3-year operation likely to disappoint

23 Feb 2012 | Jan von Gerich

The ECB will release the results from its second 3-year operation next week and expectations have been set high that another huge liquidity injection would boost markets again.

Euro sovereign downgrades - a crisis accelerator

16 Jan 2012 | Niels From

France and Austria’s top AAA ratings fell victim of the sovereign debt crisis Friday night, when S&P downgraded nine of 16 Euro countries.

Emerging Markets Outlook 2012

13 Jan 2012 | Anders Svendsen

Many interesting and globally important stories in easily digestable format.

Fixed Income Update - Beware of Collateral Crunch

5 Jan 2012 | Niels From

The continuous downgrade of strong rated issuers is making high quality collateral a scarce resource.

Cross Currency Basis Swap - Spread Narrowing in 2012

20 Dec 2011 | Niels From

Taking the temperature of the cross currency basis swap market following the coordinated central bank actions to ease money market tensions.

Danish callables are so yesterday

15 Dec 2011 | Niels From

Our expert on the Danish covered bond market, Jacob Skinhøj, has taken the temperature on the Danish covered bond market following the ARM auctions, which were finalized this week.

Outlook 2012 - kill or cure

9 Dec 2011 | Niels From

Another year is over – a new year is beginning, and kill or cure will be the theme for 2012.

Only the ECB can help – stay low risk

3 Nov 2011 | Niels From

• Future path of Greece and sovereign debt crisis highly uncertain • Only the ECB can comfort markets via committed bond purchases – directly or indirectly • Stay in the inner AAA-space, long duration, curve flatteners and long spread-over

FI Update: What to make of the Greek tragedy and the Fed debate?

1 Sep 2011 | Niels From

In the late European session on Friday, the Spiegel story that Greece was considering leaving the Euro sent jitters through financial markets.

Renewed stress—is this 'Lehman part II'?

22 Aug 2011 | Niels From

It feels increasingly like "Lehman" when watching financial markets these days. But, contrary to 2008, the level of stress varies significantly from asset class to asset class. If the risk of a global recession escalates the level of stress will intensify further leading to risk off.

Allocation Update: Central bank rescue to help only gradually

11 Aug 2011 | Roger Wessman

Central bank rescue to help only gradually. The past couple of months have clearly brought a turn for the worse in two respects.

Euro-zone leaders show courage – risk-on

22 Jul 2011 | Niels From

Euro-zone leaders finally managed to show courage yesterday, and make tough decisions. Central in the decisions is an empowering of the EFSF/ESM with new mandates that strongly helps reducing the risk of contagion.

Allocation Update: Careful as growth worries are testing

13 Jun 2011 | Roger Wessman

Slowing growth is increasingly putting downward pressure on asset prices and bond yields.

Finnish elections – another risk for Peripherals

18 Apr 2011 | Niels From

Yesterday’s Finnish parliamentary elections resulted in the EU-sceptical True Finns be-coming the third biggest party with 19% of the votes.

ECB – Fed: Mature – immature pricing

12 Apr 2011 | Niels From

Risk appetite dominates markets, and risk aversion on the back of the human tragedy in Japan proved an intermezzo. Our proprietary cross-asset risk perception measure, Nordea Risk Perception Index (NRPI) has fallen unusually sharply recently (decline = increasing risk appetite).

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