Treasuries: The Dog That Did Not Bark

The US sanctioned six Russian companies that support Russia's cyberwarfare and will expel 10 Russian intelligence officers working in the US under diplomatic cover. The escalation was in barring US financial institutions from buying Russian (ruble and non-ruble bonds from the government (central bank, finance ministry, sovereign wealth fund) starting in the middle of June. Previously, Americans financial institutions were barred from buying non-ruble debt from the government. It is hardly an inconvenience as the bonds can be bought from Russian banks. Russia's 10-year benchmark yield fell 11 bp today to bring the week's decline to 27 bp. The US sanction is a small piece of sand in the wheels for US-based global bonds funds, for example, even if the prohibitions can be extended in the future. Moreover, while the EU supported the US actions, it did not join even the mild sanctions on Russian debt.  

An ARD poll found that Bavarian leader Soeder is the overwhelming favorite of the CDU/CSU to lead the coalition into the coming national elections. The poll showed him with 72% support compared sith the CDU leader Laschet with 17%.No formal decision has been made yet, but it is expected in the coming weeks. Some see the results as a sign that Merkel is losing her sway of the CDU, but the German Chancellor has also been critical of Laschet and other state leaders for not taking a stronger line on social restrictions. Separately, a Bloomberg poll found that most expect the ECB to slow its bond-buying from the accelerated pace of Q2 and expect the program to end as currently scheduled at the end of Q1 next year. The ECB meets next week.  

The euro remains firm, but the momentum seen earlier this week faded. For the third session, the euro has approached the $1.20-level but turned back. It has spent most of these three sessions between $1.1955 and $1.1985. It appears to have held 1/100 of a cent below $1.1990, where a 400 mln euro option expires today. The euro is posting its first back-to-back weekly gain since the first two weeks of the year. Sterling's momentum is also flagging. After beginning the week with a four-session decline in tow, sterling advanced in the first four sessions this week before slipped marginally today. However, yesterday, it stalled near $1.3810, where it had stopped at mid-week too. Last week's high was near $1.3920.Still, after slipping to almost $1.3715 in late Asian turnover, sterling found a good bid in the European morning, bringing it back to the $1.3780-area.  

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Read more by Marc on his site Marc to Market.

Disclaimer: Opinions expressed are solely of the author’s, based on current ...

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