Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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The drama and the data
Christopher Dembik
Head of Macroeconomic Research
Summary: Brexit drama and US data are today's macro focus.
Over the past few days, the British MPs have voted against:
• PM May’s deal
• Customs union
• EEA
• Second referendum
• No deal
• Malthouse compromise
Yesterday, MPs voted in favor of delaying Brexit until June 30. Considering European Council president Donald Tusk’s recent comments, it is highly probable that the EU-27 will allow this delay, making a new vote on May’s deal possible. Fortunately, the ongoing Brexit drama is not having much market impact at this time, but the macroeconomic effect on business investment is likely to be disastrous.
For once today, we won’t focus on Brexit but rather on the latest US data. Industrial production is expected to rise 0.4% in February, mostly due to positive momentum in the utilities category while auto manufacturing remains soft. The University of Michigan consumer sentiment reading is due to increase again – to 95.6, according to consensus – as the positive trend from the stock market over the past weeks has led to further consumer optimism.
Finally, we expect another very decent number from the US labour market. The JOLTS survey lags the NFP report count by a month, but it is a closely watched indicator of inflationary pressures. Consensus is at 7,250 (slightly lower than the previous print) which should confirm as increase in wage pressure.
• PM May’s deal
• Customs union
• EEA
• Second referendum
• No deal
• Malthouse compromise
Yesterday, MPs voted in favor of delaying Brexit until June 30. Considering European Council president Donald Tusk’s recent comments, it is highly probable that the EU-27 will allow this delay, making a new vote on May’s deal possible. Fortunately, the ongoing Brexit drama is not having much market impact at this time, but the macroeconomic effect on business investment is likely to be disastrous.
For once today, we won’t focus on Brexit but rather on the latest US data. Industrial production is expected to rise 0.4% in February, mostly due to positive momentum in the utilities category while auto manufacturing remains soft. The University of Michigan consumer sentiment reading is due to increase again – to 95.6, according to consensus – as the positive trend from the stock market over the past weeks has led to further consumer optimism.
Finally, we expect another very decent number from the US labour market. The JOLTS survey lags the NFP report count by a month, but it is a closely watched indicator of inflationary pressures. Consensus is at 7,250 (slightly lower than the previous print) which should confirm as increase in wage pressure.
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