Once again, just before a Fed and ECB meeting, a bank needs to be rescued. On Monday, before the start of the US stock market, it was announced that JPM was taking over First Republic Bank, which had been placed under administration. This had a visibly calming effect on the markets and there should be much less uncertainty about Fed and ECB interest rate hikes than was the case in March in the course of the banking crisis. The fact that the USA followed the Swiss example here and suspended (ignored) some regulatory requirements seems a marginal note. Today, all eyes are likely to be on the April inflation data of the euro countries. The market will most likely open on a positive note.
A risk-on week with a constructive primary market environment is behind us and there are few signs that this momentum should change at the start of this trading week. Strong Q1 results from the first major US banks across the board provided further reassurance about the potential banking crisis and virtually cleared the way for another Fed rate hike in May. Meanwhile, according to a Bloomberg survey, economists expect the ECB to make three more rate hikes of 25bp each in May, June and July.
A quiet Easter week on the capital markets is behind us. The focus was on geopolitical issues with the spotlight on China (Macron, military drill near Taiwan) and the US data leak. Otherwise, there was little change in the market — the US labour market remains tight and the markets' interest rate expectations are not in line, instead diverging significantly with the “wording” of the Fed and ECB. Nevertheless, at least in the short term, there seems to be a solid equilibrium in the fixed income markets, which offers a positive issuing environment. In any case, the markets should open with a tailwind today.
Record quarter clearly missed. After a record-breaking start to the year, the ESG EUR primary market was unable to keep up the pace and clearly missed a record quarter. The strength of green bonds in risk-off phases was once again demonstrated in the second half of March. The SLB bond class seems to be struggling more and more with a lack of investor interest — regulation seems to be urgently needed here to make the product future-proof. Furthermore, the ECB reports climate figures on its corporate bond portfolio for the first time and these show that the ECB's climate score is likely to have a strong influence on the composition of the future portfolio. We wish all readers a happy Easter!
Inflation down? Not with OPEC+! While last week's inflation data brought few surprises in Europe, the surprising and significant cut in oil supply in particular is likely to rekindle headline inflation - which has so far been clearly on the decline. In recent weeks, the focus has been on core inflation in particular. We see this as confirmation of our view that the markets have oversold interest rate hikes and inflation risk in recent weeks and we expect significant pressure on the rates side this week. With these omens in mind, today's market start is expected to be burdened.