Macro: Sandcastle economics
Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.
Access both platforms from your single Saxo account.
ECB BONDS
Althea Spinozzi
Head of Fixed Income Strategy
Summary: Following a confident ECB we might see the Bund falling and risk assets tightening. It might be the perfect time to take profit, just before the second wave of COVID-19 strikes Europe.
Bloomberg News reported that the ECB might come up with a better than expected outlook about the Eurozone recovery today. Therefore, the market doesn't anticipate further accommodation for the moment being. How will the fixed income market react?
10-Year Bund to fall
The 10-year Bund (BUNDDEC20) is most likely to reprice lower as the ECB sounds confident over Europe's economic recovery. The yield of the Bund has been trading rangebound since mid-April, but we believe that following the ECB meeting it will test the resistance line at -40bps.
Italian BTPS
Italian 10 year Sovereigns (10YBTPDEC20) have been trading with a yield of around 1% since mid-July. Following the ECB meeting, we might see some risk-on behaviour that will push Italian BTP higher in the short term. If you are looking to unwind some of this position it may be an excellent moment to take profit. As outlined in my earlier article this week, we remain negative on Italian BTPs in the long term.
Investment grade and High yield spreads will tighten supporting bond issuance bonanza
A confident ECB will most likely reinforce the corporate space. As a consequence, we might see even tighter spreads in the primary market. Beware from this trend because although valuations will be supported in the short-term, in the long-term, we might see high volumes of downgrades. It's the perfect time to take profit from selected riskier assets, especially from those which have partially rebounded but are doomed to recover slowly from the coronavirus crisis such as airlines. If on Tuesday you thought that a 3% yield on a 5-years Ryanair bond (XS2228260043) was good, you might reconsider it as the second wave of COVID-19 is approaching.
Latest Market Insights
Quarterly Outlook 2024 Q3
Sandcastle economics
-
-
Bonds: What to do until inflation stabilises
Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.
-
Equities: Are we blowing bubbles again
Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.
-
FX: Risk-on currencies to surge against havens
Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.
-
Commodities: Energy and grains in focus as metals pause
Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.
Disclaimer
The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.
Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)