Bond markets are starting the week in mixed order on both sides of the Atlantic, with -3.5pts on our OATs (2.8650%), -1.2pts on Bunds to 2.4000% but +5pts on T-Bonds to 4.230%.

Note the fine session on Italian BTPs, which erased -7pts to 3.814%... and the very bad day for British Gilts, which were up +8Pts at 4.1640% (the presentation of a "cautious" budget is expected on Wednesday: confidence is clearly lacking).

The cautious attitude of American operators can be explained 4 days before the US employment figures (NFP Friday): the consensus is for an average of 200.000 job creations in February, after January's fireworks display of 353,000 new jobs, i.e. double the market's forecasts

Note the relative serenity of European operators 48 hours ahead of the European Central Bank's (ECB) monetary meeting on Thursday, at the end of which a "status quo" is widely anticipated.

The ECB's Governing Council is expected to remain vigilant regarding the disinflation process underway on the Old Continent, and to postpone the debate on the first rate cuts... which, in any case, will not occur until the FED has 'drawn first blood'.

Nervousness on the fixed-income markets has been palpable since the end of 2023: the 'pivot' was triggered on December 27, and yields have rallied by an average of more than 50pts in 9 weeks, with the situation even worse in the UK, where they have risen by +75pts.

Doubts over whether inflation will continue to fall were reinforced by Friday's publication of a less pronounced than expected slowdown in inflation in the eurozone in February.
Alexandre Baradez, Head of Market Analysis at IG France

: "It's mainly the pressure on wages that's preventing monetary institutions from cutting rates. But it would be surprising if the first rate cut didn't come in the second quarter, perhaps not at the April meeting, but more likely at the June one.

The week will also see Fed Chairman Jerome Powell address the House Financial Services Committee on Wednesday.

Investors will also continue to keep an eye on political news in the USA, with tomorrow's primaries in some 15 states, a crucial day known as 'Super Tuesday'.

'Biden and Trump are expected to win by a wide margin in their respective camps', Oddo BHF's teams pointed out this morning. Barring a twist of fate, these will be the candidates on November 5", the private bank points out.

Copyright (c) 2024 All rights reserved.