Economic Recovery “May Take Some Time to Gather Momentum”


Stock market dropped on Wednesday as Fed Chairman Jay Powell warned investors on Wednesday that an economic recovery “may take some time to gather momentum”. He also mentioned that additional policy measures may be deployed in order to shorten the period of low productivity. S&P lost 1.7%, Nasdaq closed lower by 1.6%. The uncertainty over the economy reopening as well as US-China trade tensions also gave effect.  10Y USTs closed slightly lower at 0.65% yield.


The BOE Governor Andrew Bailey hinted that its asset buying program might be boosted to soften the economic impact of the pandemic. The FTSE 100 depreciated by 1.5% yesterday also impacted by weak economic data. The pound ended the day 0.3% lower against the USD while the 10Y UKTs lost 0.04% in yield and closed at 0.206%.


Italy finally approved its delayed stimulus package (EUR 55 bn) that is going to boost liquidity on the markets as well as aiding to families. In Germany, the highest court has warned that ECB measures might plunge EU into crisis and weaken the economy of the whole union. At the same time German chancellor Merkel supported the ECB as her priority at a strong single currency.


After the week of gains, Turkish government bonds were on sale yesterday, the long end closed about 10 bps higher in yield. On a separate note, Turkish president Erdogan orders ruling AKP officials to transfer opposition party CHP`s shares in Isbank to Treasury as soon as possible according to Sabah newspaper.


Russia sovereigns closed stronger on Wednesday with yield making 2-4 bps lower. However, the equity market dropped by 1.1%. The Ministry of Finance placed a total of RUB 128 bn during its weekly auctions yesterday – RUB 92bn came from a RFLB 25 no-limit auction with a bid-to-cover 1.5 ratio. USDRUB declined by 0.4% to 73.99 level.