10-Year U.S. Treasury and German Bund Yields Each Five Basis Points Higher

January 29, 2018

The 10-year Treasury yield exceeds 2.70% for the first time since mid-April 2014. The German 10-year bund yield matched the rise of its U.S. counterpart and has already climbed 25 basis points since end-2017 to 0.67%. Ten-year British gilt and Japanese JGB yields edged a basis point higher overnight as well.

President Trump made a better-than-expected impression on world business, political, and academic leaders at the Davos World Economic Forum. The dollar opened this week up by 0.6% against sterling and the peso, 0.4% versus the kiwi, 0.3% relative to the euro, Swiss franc and Aussie dollar, 0.2% vis-a-vis the loonie but just 0.1% against the yen and yuan.

Slumping fixed income asset prices reflect optimism about world growth. Trump delivers the State of the Union Address in prime time tomorrow, and there is an FOMC meeting — the last chaired by Janet Yellen — in mid-week. Fourth-quarter GDP growth in the euro area arrives tomorrow, and the menu of Japanese data releases this week includes unemployment, retail sales, household spending, industrial production, housing starts, construction orders, and motor vehicle output.

Japan’s Nikkei-225 equity index closed unchanged today. Elsewhere in the Pacific Rim, stocks fell by 1.0% in China and 0.6% in Hong Kong but climbed 0.9% in South Korea, 0.7% in Taiwan and India, 0.4% in Australian and 0.3% in Indonesia and Singapore. Stocks in Europe, however, show losses so far of 0.4% in Switzerland and Spain, no change in Germany, and upticks of merely 0.1% in France and Italy. The British Ftse is 0.2% firmer.

Both gold (-0.6%) and WTI oil (-0.4%) are lower, but industrial metals have gained significantly in some cases.

German import prices posted a 1.1% 12-month rate of increase in December, down from 3.0% as recently as September and a 2017 average of 3.8%. The latest on-year advance is the smallest in 13 months, but last year as a whole showed the first increase since 2012 and the largest since 2011. Between end-2016 and end-2017, imported energy prices climbed 7.9%, and everything else collectively went up just 0.3%. German export prices in December were 1.0% higher than a year earlier, and they recorded an average 1.8% advance for 2017 as a whole.

In the 12 months to December, producer prices went up 2.0% in Italy, down from a 2.5% increase posted in November, while Singapore’s PPI fell by 0.6% in the same span.

Icelandic consumer price inflation of 2.4% this month was the most since July 2014 and up from on-year increases of 1.9% in December, 1.7% in November and 1.4% in September.

On-year growth in Spanish retail sales of 1.2% in December undershot expectations of a 2% increase. Irish retail sales, in contrast, posted a robust 7.2% December-over-December advance.

Austria, which is always the earliest European country with a reported manufacturing purchasing managers index each month, saw such back of December’s record high of 64.3 to a 3-month low of 61.3 in January.

Finnish consumer confidence improved by 0.2 points to a score of 24.2, which is the highest since this data series began just over 22 years ago.

U.S. personal income and spending, as well as the monthly observations of the savings rate and the PCE and core PCE price deflators, will be reported later this hour. Colombia’s central bank is holding its first monetary policy review of 2018 today.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.


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