Chart of the Day
There’s been lots of talk about how the Fed’s current QE purchases are exceeding Treasury debt issuance and potentially causing yields to decline (see below), but the much more striking development has been in the eurozone. The ECB’s balance sheet operations, including direct debt purchases and cheap loans to banks that can be funneled into debt securities, mean its assets are now equivalent to 65% of the region’s public debt. No wonder, then, that Greece’s 5-year bond yields turned negative yesterday despite its apparent huge debt burden.
Macro
In the eurozone, industrial production rose by 0.8% MoM in April. That took the YoY rate to 38.9% due to the base effect from this time last year, when production sank.
Wholesale inflation is taking off in India – there are concerns that inflation across EMs could cause political instability in some places.
Canadian manufacturing sales fell by 2.1% MoM in April. Growth was weaker on a volumes basis.
Australian house price inflation accelerated to 9.1% in May.
Markets
The ECB’s purchases may have contributed to lower bond yields in the eurozone.
US yields rose yesterday but the trend over the last week has been negative.
Some believe that is because the Fed’s asset purchases have exceeded debt issuance from the Treasury since April.
Bond yields have fallen because inflation expectations have fallen, though, and inflation linked swaps have also fallen. If it was just about Fed purchases, we’d expect to see it show up mainly in the real yield.
It was a strong day for the main cryptos yesterday. Bitcoin is currently up by 20.2% in the past week, though still down significantly from the highs, as is Ethereum.
Like what you see? Please forward this email to your friends and colleagues, or use the button below to share it on social media. They can also follow us https://twitter.com/macro_daily
Got a question? You can reply directly to this email to get in contact.
