Fed QE2? Fun for bonds, pain for the buck

- FI Strategizer: "After the last FOMC meeting, 10Y US and Bund yields are almost back to end-August levels. To justify lower yields from here, a worsening growth outlook (unlikely given next week's data), more stress in the EMU periphery, or additional hints on QE would be needed."
- EU Portfolio Strategy: "Hopes for QE2 provided strong support to EGBs this week. The EMU index is up +4.79% YTD and the excess return of our active portfolio is +20bp. It is difficult to find arguments in favor of a trend reversal: we stay moderately long duration."
- MM: "We expect investors to only partially roll over the EUR 93bn coming from expiring 6M and 12M LTROs. Excess liquidity and maturity of ECB operations will likely fall. Expect a moderate increase in MM rates."
- Italian 4Q funding: "We present a detailed analysis of Italian 4Q10 funding. Supply pressure should focus mainly on the short end and the 10Y, while it should be limited at the extra-long end."
- Trade Idea: "We suggest switching from OBL Apr15 into OBL Oct15 given the appealing benchmark roll. Furthermore, on the Spanish curve, the 15Y has cheapened to an interesting level vs. the 10Y and 30Y."
- FI Special: "We discuss how much haircut is discounted in current periphery spreads vs. Bunds."
- Supply Corner: "Next week, there are no redemptions in the EMU. Gross supply should be rather subdued, ca. EUR 9/12.5bn, mainly coming from Italy. The US will issue USD 100bn in Treasuries at the 2Y, 5Y and 7Y."
- Inflation: "The September flash estimate should show an acceleration from 1.6% to 1.8% yoy. The move should be totally energy-driven."
- FX Strategizer: "The FOMC statement, hinting at a possible restart of QE, instilled a negative bias in the US dollar, but selling pressure may be partly mitigated by local risk factors, FX trading should thus stay choppy."
- EUR: "Risks that our long-run target of 1.36 may be reached much sooner than expected are concrete if US data disappoints, but renewed EMU woes, involving primarily Ireland, may still slow the EUR-USD rise."
- JPY: "Risk of aggressive BoJ intervention if USD-JPY retests 83 should discourage heavy USD-JPY sales, even in case of a firm Tankan survey. EUR-JPY still capped above 113-115."
- CHF: "The USD-CHF drop below 0.98 should spill over to EUR-CHF and frustrate any recovery attempt even if EUR-USD remains firm. Selling both USD-CHF and EUR-CHF on a rally is still recommended."
- GBP: "Cable may still benefit from the weak USD towards a 1.5850 test. EUR-GBP should mostly remain capped above 0.85-0.86."
- Pacific Rim: "Commodity currencies should remain favored against the USD, but a partial correction is required before buying them back."
- Nordics: "More consolidation is expected for EUR-SEK between 9.15 and 9.25. EUR-NOK to offer selling opportunities above 7.93-7.95."
- TICS Monitor: "Long-term net inflows to the US amounted to USD 61bn. Last month's appetite for Treasuries & Agencies was reconfirmed."

Unicredit Curves & Crosses 20100924 t>

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