Bond Prices Edge Higher Ahead of FOMC; Inflation Heats Up — 10-Year 0.671%. Traders are looking out to Wednesday’s Federal Open Market Committee meeting statement and anticipate policymakers will continue to lean dovish with rates on hold for the foreseeable future. USD dollar is lower at early European session with positive news on potential vaccine bringing risk on.
Not much happening today economic data wise this Monday. All eyes are on FOMC, MPC, Bank of Japan later this week. The pandemic is continuing to upend the global economy with US showing cracks in recent labour market strength and virus cases continuing to climb globally. Israel has announced a second lockdown. At the same time European markets are seen opening higher, as Astra Zeneca announced it has resumed phase 3 trials of its Covid-19 vaccine candidate.
Last week has been a big for the UK with a Brexit drama unfolding. The pound tumbled after the EU issued an ultimatum to withdraw proposed legislation that would breach the terms of Brexit Withdrawal Agreement. UK rejected the ultimatum and will go ahead with its new Internal Bill, which is a breach of international law. A parliament vote on the bill is expected today. Markets had a mini rebound when UK and Japan agreed a trade deal. U.K. Sells Negative-Yielding Bills as Market Anticipates BOE Cut this week.
Japanese Chief Cabinet Secretary Yoshihide Suga was elected leader of the ruling Liberal Democratic Party by an overwhelming majority, ushering in the country’s first change of prime minister in almost eight years.
Oil prices strengthened on Monday with US Crude futures traded 0.5% higher at $37.53 due to fierce storm in the Gulf of Mexico shutting downs production. Gold futures rose to $1,957.
The MOEX Russia Index rose last Friday climbing 0.4%. Gazprom PJSC contributed the most to the index gain, increasing 2.4 percent. Magnit PJSC had the largest increase, rising 4.3 percent. Shorter-term Russia government Eurobonds securities declined in Friday afternoon trading.
Argentina’s new bonds are trading at a wider spread to U.S. Treasuries than Ecuador’s after the inclusion of both notes in JPMorgan’s EMBIG Diversified index. The wide spreads underscore investor scepticism that both countries, which recently restructured their debt, will be able to jumpstart growth and eliminate their fiscal deficits after months of coronavirus lockdown. But the difference also shows investors are more optimistic over Ecuador’s recovery than Argentina’s. Brazil’s Swaps Rates Curve Long End Cheaper with bonds market volumes finally gaining traction.
Kenya is at high risk of external debt distress as the country’s foreign currency obligations grow faster than tis income abroad. The ratio of debt-service costs to exports for East Africa’s biggest economy will remain above the 21% threshold recommended by the International Monetary Fund until at least 2025.