Europe Bond Investors Brace for Data That May Show Virus Impact

(Bloomberg) -- Investors looking for evidence of how European economies may have been impacted by the coronavirus will get some on Friday.

Government bonds may rise if forward-looking purchasing managers numbers from Germany, France, the U.K. and the euro area for February show that confidence in the region is slipping amid growing concern over the virus’s effect on economic growth.

The data would add impetus to a rush to safety that sent Greek debt yields below 1% for the time, and spurred record inflows into bond funds in the week through Feb. 12. The rally also sent Italy’s 10-year yield premium over Germany’s to the lowest since May 2018.

There will also be scrutiny on the chances of further monetary easing from the European Central Bank, which releases the account of its January governing council meeting on Thursday. The minutes loom after the euro’s worst start to a year since 2015, leaving it down over 3.4% since 2020 began.

Three set-piece speeches from policy makers are due next week and investors will be looking for clues on the future direction of interest rates from the words of Philip Lane who speaks twice and Luis de Guindos.

• Debt debt sales are scheduled from Germany, France and Spain, while Belgium may hold a syndicated bond sale
• Details of the discussion at the ECB’s last meeting, at which it kept rates steady, are due on Thursday
• ECB’s Philip Lane speaks in Lisbon on Monday and again in New York at the U.S. Monetary Policy Forum on Friday. Vice President Luis de Guindos speaks in Frankfurt on Thursday
• Bank of England’s Silvana Tenreyro speaks at the forum in New York on Friday
• Euro-area, German, French and U.K. preliminary manufacturing and services PMI for February are due on Friday
• Germany also publishes February ZEW economic confidence survey Tuesday
• Aside from the factory data, the U.K. will also publish average weekly earnings and the unemployment rate for December on Tuesday, January inflation on Wednesday and retail sales for January on Thursday. Government borrowing data will be released on Friday.

SUPPLY/REDEMPTIONS:

• Germany will sell five billion euros of new schatz with a 0% coupon, maturing in March 2022 on Tuesday and 1.5 billion euros of buxl with a 1.25% coupon maturing in August 2048 on Wednesday.
• Spain will sell a new five-year note maturing in January 2025 with a 0% coupon as well as a 10-year bond with a 0.5% coupon maturing in April 2030 on Thursday. The size of the auction will be announced Monday.
• Also on Thursday, France will sell bonds maturing in February 2023 with a 0% coupon, March 2025 also with a 0% coupon and November 2026 with a 0.25% coupon for up to 8.75 billion euros.
• No euro-area nations are scheduled to pay redemptions on bonds next week, but Austria and Ireland will pay coupons of around 200 million euros each.
• Italy’s Treasury due to announce the zero-coupon and linker bonds for sale on Feb. 25 on Thursday.
• Moody’s Investors Service reviews France’s Aa2 sovereign rating on which it holds a positive outlook, next Friday.
• U.K. Debt Management Office will sell 3.25 billion pounds of gilts with a coupon of 1.5% maturing in July 2026 on Thursday.

To contact the reporter on this story: James Hirai in London at jhirai3@bloomberg.net

To contact the editors responsible for this story: Dana El Baltaji at delbaltaji@bloomberg.net, Michael Hunter

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