Asset liability matching demand from pension funds will support the longer end and assuming the ECB hikes rates aggressively, we might see a flat yield curve by April.
More Quotes from Kornelius Purps:
In the near term, the gilt market will react to any economic data release that helps shape investors' BOE view. The annual growth figure was lower than expected, showing continuation of declining growth.Kornelius Purps
It's yet more bad news for GM and we can't rule out the possibility of even worse to come. Given the big sell-off we've had in Treasuries, this is a good time to buy.
Kornelius Purps
The ZEW indicator is at levels which previously have marked a high, and discussion will now start on whether the ECB will hike rates earlier than in March. This will put the front-end under pressure.
Kornelius Purps
In all likelihood, the time when obscure statements from FED Chairman Alan Greenspan caused analysts to ponder about the message between the lines will be over as Bernanke is expected to increase transparency by choosing clear-cut language -- more transparency, but less fun.
Kornelius Purps
Assume that a time machine is beaming you back to Monday morning. You start the week with the impression of an unexpectedly strong 274k US payroll report in mind. In addition, a clairvoyant tells you that 1) US retail sales surged by 1.4 m-o-m in April, 2) German growth advanced by 4 q-o-q annualized in Q1 2005, 3) speculation about a revaluation of the Renminbi will intensify, 4) the oil price will fall by about USD 3.50 per barrel this week, 5) and the US Treasury will sell USD 51 bn in Treasury Notes. You make up your mind and conclude that in this environment yields need to go up. At least 99 out of 100 market participants with the same information would have shared your view. But reality is different. Yields are down and down and down again. These are Schwarzenegger markets, no one can beat them.
Kornelius Purps
The ECB has signaled that if there was any risk inflation expectations would run away, they would contain them. With this central bank rate-hike cycle, it may lead to a flat yield curve by April.
Kornelius Purps
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