French government bonds, in particular bonds with maturities less than 10 years
Market movers today
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Today is another quiet day in terms of major economic data releases.
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In the US today, we are due to get the final figures from the University of Michigan in February. Although the preliminary figure suggests that the index has fallen a bit in February, it remains well above the historical average. Optimistic consumers tend to spend more and hence the high consumer confidence is a good sign for economic growth.
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In Sweden today, we are due to get business and consumer confidence data from the National Institute for Economic Research (NIER), which is interesting but, alas, not as good an indicator for the Swedish economy as it once was.
Selected market news
Yesterday, US Treasury Secretary Steven Mnuchin said that he will explore issuing ultra-long debt, i.e. debt maturing in more than 30 years, in line with previous comments that he will ‘take a look at everything' when it comes to maturities. With interest rates expected to be historically low for a long period of time, it ‘makes sense' for the US Treasury to explore 50- and 100-year maturities, he said in a CNBC interview. While the Federal Reserve has signalled that interest rates may go up this year (currently the markets have priced in approximately two hikes this year), it is ‘really about where we are not relative to just today but where we are relative to interest rates over a long period of time', he said. However, so far, the US Treasury has been reluctant to issue debt with maturity longer than the current maximum of 30 years, perhaps as one of the previous administration's goals was to keep issuance regular and predictable. Though the market's reactions were quite modest, the US government benchmark 2Y30Y bond yields steepened some few basis points after Mnuchin's comments. In addition, Mnuchin signalled that it is too early to judge China as a currency manipulator and that he wants to have a process within the US Treasury looking at currency manipulators across the board.
French government bonds, in particular bonds with maturities less than 10 years, continued to perform relative to Germany yesterday on the back of the increased Oddschecker implied probability indicator of Emmanuel Macron winning the French Presidential Election as the centrist politician François Bayrou offered to form an alliance on Wednesday. However, there is a long time to the first round (23 April) and even longer to the second round (7 May), so it is likely to be only a ‘bump' in the road. 23 February, where we lay out our take on the market implications if Le Pen wins, with a particular focus on euro and Nordic markets. We focus on the immediate market implications following a Le Pen win. However, we do not look at the market implications of a ‘Frexit', which would require a separate analysis.
Author
Danske Research Team
Danske Bank A/S
Research is part of Danske Bank Markets and operate as Danske Bank's research department. The department monitors financial markets and economic trends of relevance to Danske Bank Markets and its clients.
