Bank Research Consensus Weekly 07.23.12
ECB Opens Up For Burden-Sharing For Senior Unsecured Bondholders
Henrik Arnt, Senior Analyst, Danske Bank
The demand for high quality cash credit seems insatiable of late. In the Nordic region, we have seen very short dated senior paper from banks trading at negative yields illustrating the ongoing search for safe assets as investors focus on return of capital rather than return on capital. Consequently, the short end of the credit curves generally look very expensive. But as long as the concerns linger on Spain et al, this is likely to remain the case. Primary market activity has lowered of late although Akzo Nobel today came to the market with a 10Y EUR benchmark transaction. We will probably have to wait until the latter part of August before we see any activity picking up again. If conditions remain as they are today, we are likely to see a flurry of issuance.
Data, Fed Reinforce Low Interest Rate Outlook
John E. Silvia, Chief Economist, Wells Fargo
This week’s economic data and Chairman Bernanke’s outlook support the view of continued low interest rates for this year. Such an outlook will only be reinforced by further concerns of European/Chinese economic slowdowns and the impending fiscal cliff.
Canada – Is the Glass Half Full Or Half Empty?
Jacques Marcil, Senior Economist, TD Bank Financial Group
There continues to be somewhat of a disconnect between the signals sent by the Bank of Canada on interest rates and the expectations being priced into Canadian fixed income markets. This week, the central bank continued to use language signaling that the next rate move will be in the upward direction, even if it may be several months away. Yet, rate expectations as measured by BAX futures contracts continue to price in interest rate cuts by year-end. Furthermore, the Government of Canada 2-year bond yield remained below 1% – implying no change in rates over the next few years.
Compiled by David Song, Currency Analyst
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