US Treasury curve steepening was at the front of investors’ minds this week as the impressive selloff in the long end UST continues. 30Y US Treasuries widened another 5bp yesterday to 1.42% (+25bps on the week); 10Y increased 5bp to 0.72%, while 2Y yield was little changed at 0.16%. The 2s10s spread reached 54bp, a 2-month high. The move came on the back of a further bond supply in new 30Y UST auction. Better than expected data on US jobless claims also helped the UST move. Initial claims fell to 963k vs 1.1mn expected, falling below 1mn for the first time since March, while continued claims decreased to 15.5mn vs. 15.9mn expected. Equity markets were mixed however, despite a better data, as the concerns about lack of agreement on US fiscal stimulus weighed on the sentiment. MSCI EM Index added 0.2%, Shanghai Composite was flat, Nikkei 225 climbed 1.8%, DAX lost 0.5%, FTSE 100 retreated 1.5%, S&P 500 edged down 0.2%, although Nasdaq ended the day +0.18%. Brent fell 1% to $44.8/b.
In Europe, the weaker sentiment came amid headlines that Germany had seen new cases rise to the most in more than three months. German Bunds widened 4bps yesterday, following USTs, with 10Y AT -0.409% at the time of writing. Periphery also closed small wider in tandem, BTPS added 5bps in yield, SPGB +7bps, GGB +6bps, while CYPRUS yields rose by only 2bps. In corporate news, Softbank is showing that it is hard to completely let go of an investment, as the headlines announced that the bank is injecting another $1.1bn into WeWork, after the company was said to have made progress on reducing its cash burn. WEWORK 25 bonds are trading in the high 60s area.
In MENA region, Israel and the UAE made a historical breakthrough yesterday, agreeing to normalize diplomatic relations. The move was not welcomed by everyone however, as Palestine withdrew its ambassador from the UAE in response. KSA bonds ended the day marginally unchanged although the long end was up as much as 1pt earlier in the day, before reversing. The short end of KSA, ADGB and QATAR continued to be well bid, however. HY space also saw strong demand with OMAN and BHRAIN curves tightening 7-10bps. The underperformer was EGYPT with some supply weighing heavy on the curves, allowing street to cover shorts. The bonds ended the day marginally unchanged. IRAQ curve was the outperformer with the real money demand pushing the bonds up 1.25pts.
In Latam, the trading flows were mixed. Higher Beta ARGENT continued to drift lower on the back of no new buyers and thin interest. ECUA was marginally unchanged on the day. In Lower beta space MEX was weaker yesterday on the back of Ts move, with MEX 48 loosing 1.5pts on the day, PEMEX underperformed the sov with bonds as much as 2pts lower in the long end. COLOM showed similar moves with the recent COLOM 51 dropping 2pts to 112 levels this morning. The rest of the lower beta space like CHILE/PANAMA/PERU fared better with the bonds -50c/flat on the day.
In CIS, demonstrations in Belarus continued to intensify, crowds of protesters swarmed the streets and thousands of workers rallied outside industrial plants, protesting the recent win of Lukashenko in the disputed presidential elections. Interestingly enough, BELRUS bonds have not seen a significant sell-off, with BELRUS 31s only loosing 4pts since the protests began. Elsewhere, CIS IG names followed the move in USTs with Russia 47s and KAZAKS 45 loosing around 1pt in cash price. In HY, UZBEK and UKRAIN curves were steady yesterday, ending the day marginally unchanged.
In SSA, the space was mostly stronger yesterday. NGERIA, KENINT and GHANA continued to be well bid, adding +50c/1pt in price on average. ANGOL however continued to be under pressure from sellers, with the bonds flat/+25c on the day.