Europe Bonds Seen Under Shadow of ECB Dilemma While Supply Slows
Europe Bonds Seen Under Shadow of ECB Dilemma While Supply Slows
(Bloomberg) -- Euro-area bonds may continue to face the fallout from a German court ruling that threatens to restrict the European Central Bank’s debt-buying program, the market’s single largest source of support.
The May 5 decision by the constitutional court in Karlsruhe, which gave the ECB three months to justify its original asset-purchase plan, will remain a major risk for European debt, according to Mizuho International Plc and Commerzbank AG. Still, the market will receive some relief in the coming week from a slowdown in euro-area government bond supply.
“The German court ruling has the potential to trigger a constitutional crisis or a market meltdown,” Christoph Rieger, head of fixed-rate strategy at Commerzbank AG, wrote in a note to clients. “Market hopes for a swift increase in purchase volumes or further deviations from the capital key could at the very least be dampened until a difficult compromise can be found.”
German 10-year bond yields climbed five basis points this week to minus 0.53%, the first such increase in a month, following the court decision.
Here’s what could drive rates markets next week (all times London):
- Monday:
- 9am: Italian production data for March
- 1pm: BOE’s Breeden speaks on Webinar
- Tuesday:
- 10am: Netherlands to sell up to EU3b of 0% 07/2030 bonds
- 10:30am: Germany to sell EU4b of 11/2027 bonds
- Wednesday
- 7am: U.K. industrial production and manufacturing production data for March; preliminary GDP report for first quarter (YoY est. -2.5%, prior 0%)
- 10am: Italy to sell bonds
- 10:30am: Germany to sell EU1b 1.25% 2048 bonds
- Thursday:
- 7am: German inflation data final reading for April; YoY est. 0.8%, prior 0.8%
- Spain also releases inflation numbers
- 9am: ECB publishes economic bulletin
- 11:30am: BOE Governor Andrew Bailey speaks on Webinar
- 7am: German inflation data final reading for April; YoY est. 0.8%, prior 0.8%
- Friday:
- 7am: German preliminary GDP data for 1Q; YoY NSA est. -1.9%, prior 0.3%
- 9am: Italian industrial sales for March
- 10am: Euro area preliminary GDP for 1Q; YoY est. -3.3%, prior -3.3%
- 10:30 a.m. Ireland to sell bonds
- 10am: U.K. to sell GBP3.25b 0.625% 06/2025 bonds
- 11:30am: U.K. to sell GBP2.25 1.25% 10/2041 bonds
- NOTE: ESM will also come to market for issue this week
©2020 Bloomberg L.P.