It was not a good day for bond markets, despite the wave of risk-offs that swept through European stock indices... perhaps due to disappointing economic indicators in the Eurozone.

The German Bund with the same maturity posted +4Pt to 2.365% despite a -2.1% plunge in the DAX40, and our OATs fell +6.1Pts to 3.140% despite the CAC40's -2.8% (i.e. -200Pts).
Further south, Iberian 'Bonos' tightened +6Pts to 3.114%, Italian BTPs +5.5Pts to 3.647%.
The 'figures of the day' are not reassuring, either for inflation (EU CPI) or for future growth (ZEW): inflation in the eurozone came out at 2% annualized in October, after +1.7% in September, and the 'ZEW' in Germany sank by -5.7Pts.

The possibility of the ECB stepping up the pace of its rate cuts to -50Pts is no longer part of the central scenario, given the differences of opinion that currently seem to prevail within the institution.

And on the growth front, in Germany, the ZEW index of investor sentiment is at half-mast, reflecting the impact of the political crisis caused by last week's break-up of the three-party coalition.
The ZEW index fell by 5.7 points in the November survey compared with the previous month, to stand at +7.4.

"Economic expectations for Germany have been overshadowed by Donald Trump's victory and the collapse of the German coalition government," explains ZEW President Achim Wambach, commenting on the survey results.
In addition, assessments of the current economic situation in Germany are also increasingly pessimistic, with the corresponding indicator down 4.5 points to -91.4.

Germany's inflation rate - measured as the change in the consumer price index (CPI) compared with the same month a year earlier - has been confirmed by Destatis at 2% for October 2024, compared with 1.6% the previous month.

No figures from the US, but the attraction exerted by equities and then confidence in fiscal support (less revenue/more deficit) continue to weigh on US T-Bonds.

The '10-yr' has rallied +9pts to around 4.441% (+2.2%), the '2-yr' +8.5pts to 4.338% and the '30-yr' almost +9pts - i.e. +2% - to 4.566%, a zenith (or 'worst level') since last July 3 (propelling mortgage rates above 7.00%).
The '10-yr' has seen its yield retract by +84Pts since mid-September (as if the FED were preparing to raise rates by three and a half times... in 2025).
Lastly, UK Gilts have soared +14.4pts to 4.567%, and are now on a par with US 3-year yields.

All this has smelled of sulfur for weeks, and especially since last Tuesday: reasons for concern that Wall Street has warded off with a string of all-time highs since Wednesday 6 /11.... illustrating the metaphor of markets 'climbing' the 'Wall of Worry'.


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