Markets
The busy eco calendar kicked off today with US JOLTS job openings and consumer confidence. The former missed the bar. The August reading was revised down from 8.04mln to 7.86mln and job vacancies came down further in September to 7.44mn, way off the 8mn mark. It was the lowest reading since early 2021 and for the first time this cycle dropped below the pre-pandemic high (7.6 mn). Given the Fed’s sensitivity towards the labour market and employment, US yields in a kneejerk reaction wiped out (almost) all of the intraday gains (5-7 bps). The larger-than-expected improvement in consumer confidence halted the move though. The Conference Board indicator in October jumped from 99.2 to 108.7 vs 99.5 expected. It’s the highest level since January of this year. Joe Sixpack turned more optimistic on the current situation (123.8 to 138) and sees a rosier future ahead. The expectations component (from 82.8 to 89.1) recovered to levels not seen since December 2022. The chief economist at the Conference Board noted that “views on the current availability of jobs rebounded after several months of weakness, potentially reflecting better labor market data.” US yields currently still add between 0.4-2 bps in a small steepening of the curve. German Bunds underperform with yields adding 2.5-4 bps in a similar curve shift. UK gilt yields eke out a few bps as well ahead of tomorrow’s long-awaited budget proposal. The 2-yr yield is currently testing a 5-month high, the 10-yr is setting one. US data and technical support areas nearby allowed EUR/USD to recover from a low around 1.077 to back above 1.08. USD/JPY holds steady around 153.3, keeping DXY in place as well at 104.41. Sterling’s audacious attempt to seize the EUR/GBP 0.83 big figure failed for the time being. EUR/GBP is nonetheless down for the day (0.831).
The Slovak Republic launched a new 7-yr syndication (Nov 6, 2031) deal today. With their second and final syndication of the year following a €3bn 10-yr deal in March they raised €2bn, priced at MS+70 bps (compared to MS+90 area initial guidance). Books ran above €7.5bn. Via multiple regular and a special auction in February, Ardal also raised €7.2bn year-to-date. Combined with a small FX-deal (CHF; €0.65bn), the total raised so far amounts to €12.85bn. The original long-term funding target from the start of the year stood at €13bn (€5bn redemptions, €7.6bn deficit) but could be revised lower due to a lower cash deficit (+/- €5.8bn). Part of today’s proceeds could therefore be used in prefunding for next year. The 2025 funding target will be €12-13bn stemming from €6.5bn bond redemptions and a forecasted deficit of €6.4bn. Ardal targets to raise €6bn via regular monthly auctions and €6bn via syndications.
News & Views
News agency Reuters reports that China is mulling approving the issuance of over CNY 10tn in extra debt in the next few years. It would be split between CNY 6tn of special sovereign bonds and CNY 4tn worth of special-purpose bonds for idle land and property purchases over the next 5 years. China’s NPC is looking to approve the fresh fiscal package on the last day of the November 4-8 meeting. In case Donald Trump wins a second term in office, Beijing may even decide on a stronger fiscal package according to sources. Under impulse of dollar strength, USD/CNY rose to its strongest level since the end of August (USD/CNY 7.14).
The Swedish Riksbank published its new Business Survey today. The general tone is that it’s hard to see any improvement in the near term. The manufacturing industry no longer believes that the economy will improve in the near future, and optimism in the retail trade sector has also declined compared with the spring. The export industry is feeling the effects of weaker demand from the rest of the world, which is reflected in the continued fall in new orders. The construction sector believes that it will take even longer to see a clear upturn in the demand for housing. Weak demand is putting pressure on selling prices. The fact that inflation and interest rates have fallen suggests that the wage bargaining rounds will not get out of hand. Today’s Business Survey strengthens the case for a 50 bps Riksbank rate cut at the next, November 7, meeting. EUR/SEK is unmoved near 11.50, the weakest SEK level since mid-August.
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