Jul. 2, 2009 (Action Economics) --
European Morning Session
European debt futures have been volatile today, Bunds ahead of today's ECB announcement and Gilts on the back of the 30-year Gilt auction (which sent Gilts sharply lower), BoEspeak and credit conditions survey (see below). The ECB is expected to confirm the current policy stance. However, comments will be scrutinized for indications if the ECB is starting to prepare in exit strategy from its expansionary policy.
As of 10:02GMT the September 10-year Bund future is up 18 ticks on the day at 121.10, while the corresponding Gilt future is down 8 ticks at 117.29. In the cash market the 10-year Bund yield is down 2 bp at 3.39% and the 10-year Gilt yield is up 2 bp at 3.78%. By comparison stock markets are lower, with the DAX down 1.35% and the FTSE 100 down 0.63% on the day as of 9:48GMT.
Today's European calendar had eurozone May producer prices, which dropped 0.2% m/m and 5.8% y/y (median -5.6% y/y), down from -4.6% y/y in the previous month. The annual rate remains dominated by energy price developments with prices excluding energy falling a much more moderate 2.9% y/y. Meanwhile, the unemployment rate jumped to 9.5% (median 9.3%) with April rate revised up to 9.3% from 9.2% reported initially.
In the U.K., the BoE Q2 Credit Conditions Survey showed increased availability of corporate credit, but rising spreads, suggesting that we have yet to see any impact from the BoE quantitative easing efforts. BoE's Besley did not want to provide any details for an exit strategy in today's speech, while new BoE member Miles sounded less dovish than his predecessor Blanchflower. Construction PMI fell back to 44.5 in June, from 45.9.
Elsewhere, the Riksbank unexpectedly cut the repo rate by 25bp to 0.25% (median was for a steady 0.50% rate) and now sees the policy rate remaining at this low level for over a year. SEK100 bln in 12m loans will be offered to Swedish banks at a fixed rate.
