US Treasury continues with the sale of T-bills

Sverre Holbek, CFA Danske Bank A/S

Market movers today

The preliminary Spanish CPI data will provide the first clues to march inflation in Euroland.
The US Treasury continues with the sale of T-bills (USD89bn) and 5Y bonds (USD35bn) after yesterday's 2Y auction, which drew the highest yield since 2008.
A string of tier-2 data from Sweden and Euroland. These are not expected to have much of a market impact.
We published our Q2 macroeconomic outlook for the Nordic economies this morning.

Selected market news

The Asian equity markets followed the positive trend from the US markets as tensions over the possible trade was between US and China have eased. There have been talks between US Treasury Secretary Steven Mnuchin and his Chinese counterparts on how to reduce the trade gap between China and the US as well as China avoiding the tariffs on exports to the US.

Furthermore, the North Korean leaders made a surprise visit to China, which was also seen as a positive factor for the markets with the South Korean won strengthening this morning. Hence, the Nikkei jumped more than 2% this morning. The JPY weakened modestly against the dollar.

Yesterday's auction of 2Y US Treasury bond drew the highest yield since 2008 on the 2Y bonds. The bid-to-cover was in line with previous auctions but market makers had to take a larger share of the auction. Focus is now on the 5Y auction tonight.

Russia's rouble saw significant pressure yesterday as the USD/RUB spiked 1.2% within a few hours as more than half of the EU countries, the US and Ukraine announced they are expelling more than 100 Russia's diplomats in support of the UK's allegations against Russia in the nerve-agent poisoning case on the British soil. Australia and Canada have also joined the action of expelling several Russian diplomats. US President Donald Trump has also ordered for Russia's consulate in Seattle to be closed. As we have been pointing out, the major mover for the RUB in the near term remains geopolitics. In the current setup, we recommend being RUB sellers before Russia's response appears as we could easily see a tit-for-tat escalation. Yet, looking at Russian macro fundamentals, we remain RUB bullish in the long term.

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Author

Sverre Holbek, CFA

Danske Bank A/S

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