Biden’s lead is widening, NFP numbers on the horizon

While the election saga continued in the US and Trump’s chances of winning keep decreasing with more votes being counted, the markets sustained its positive sentiment on the day, pricing out the uncertainty of the next president and welcoming the democratic lead, although risk assets gave up some of their daily gains after US investors were seen to start locking in some profits, driving the markets slightly lower. Furthermore, we had jobless claims data coming out of the US yesterday, which printed slightly worse than expectations: Initial claims were at 750k (vs 735k exp) and continued claims fell to 7.285mn (vs 7.2mn exp).  Risk assets soared for the third day in a row although Treasuries gave up some of their early gains with 30Y yields ending the day 2bps lower at 1.52%. Equities finished the day in the green: S&P 500 +1.9%, NASDAQ +2.6%, FTSE +0.4%, DAX +2% and Shanghai Composite +1.3%. Oil was marginally flat on the day with Brent ending at mid-40 levels/barrel. Apart from the fast-diminishing Trump lead in Georgia and Pennsylvania, all eyes will be on the NFP data that’s also coming today. The market expectations are a 600k rise in total NFPs, a 0.2% decrease in the unemployment rate and 0.2% MoM increase in average hourly earnings.

Still in Europe, UK’s BOE kept the rates unchanged yesterday, but increased their asset purchase target by GBP 150bn (50bn more than expected). GBP advanced 1.46% to 1.31 lvls vs USD at the time of writing. Elsewhere, German Bunds ended the day in the red as 10Y yields 3bps to -0.625% area, however EU periphery mostly stayed strong, with spreads tightening thanks to the risk on sentiment in the markets. ROMANI was a big outperformer with the yield dropping 9bps across the curve, BTPS ended the day 1bps lower in yield terms and GGB -3bps in yield despite a new national lockdown being announced yesterday, while SPGB underperformed, widening 2bps in line with bunds.

Russia was also busy yesterday as investors came back from the national holiday a day prior with bonds trading up and RUB stronger despite the chances of a Biden win increasing. In IG, RUSSIA 47 added 1.75pts in price yesterday to 136 levels, KAZAKS 45 +1pt to 161s. In HY, BELRUS and UZBEK both added 0.5pts, and the recently issued NBUZB 25 was seen up 50c to be bid at 100.5 levels. UKRAIN was the outperformer in the HY space, with UKRAIN 30 EUR adding as much as 2.5pts to 89.5 levels, although it’s also given up some gains since then to high 88-89 area. In rumours today we have The Sun’s report that President Putin could resign in January due to rumoured Parkinson’s disease… Well, if it ends up indeed being true, the impact could be major.

In MENA, the trading was inline with the markets moves with bonds deep in the green on the day. ADGB 70 was seen trading at par, up a total of 10pts in November, although it gave up some of the gains in the evening and finished 2pts lower than highs at 98 levels. KSA followed a similar path with KSA 60 trading at high 128s during the day, but finished at mid 127s. EGYPT traded up as much as 2.5pts at some point yesterday with EGYPT 50 seen go through at 108.375, however ended the day about 75c off the highs at mid-107 levels with more profit taking coming through. OMAN finished the day at net +1.5pts at 88 after reaching 89 levels at some point with some selling seen across the new bonds and the long end amid the headlines about potential sukuk issuance.

In SSA markets the bonds were also trading strong with bonds up 2-3pts on average. NGERIA 47 was seen trading at 98 levels (up 3pts on the day) and GHANA 51 up 2pts to 97 levels and even ZAMBIN traded up a point. Most profit taking was seen in ANGOL and IVYCST Eur curves, both however still finished the day 1.5-2.5 pts up. Interesting to note we have noted investors starting to look at switching into Nigeran banks from NGERIA sovereign, as the yield differential widened between the 2. New FBNNL 25 we traded as high as 99.8 levels while good buying cares were seen in FIDBAN.

Latam continued to trade strong with BRAZIL adding another 1.5-2pts yesterday with ETFs seen buying, together with almost +5pts rise the day before in the BRAZIL 50, the move came to +7pts in 2 days, wow! PETBRA also followed the sovereign adding 1-2pts across the curve. In MEX / PEMEX, we closed 0.5-3pts off the highs although still in the green. The move was more pronounced in Pemex given OW positioning amid profit taking. MEX remained well bid by RM but was ultimately affected to the treasury retracing from the highs. In HY, ARGENT was also well bid, closing at the highs up 1-2pts with both RM and HF adding positions.