ING analyserer centralbankernes håndtering af den stigende inflation og konkluderer, at ECB er bedst til at give signaler om inflations- og renteforventninger. Men én ting er dog sikkert, mener ING: At renterne vil stige. Men når det er sagt, bør investorerne lægge mere vægt på de makroøkonomiske data end på centralbankernes udtalelser. Økonomien slæber sig langsommere afsted, end mange tror, vurderer ING.
Rates Spark: Curve pressure points
The European Central Bank, by stabilising the front-end, has put the back-end on the hot seat. The Fed has left the 5Y in the driving seat, while the Bank of England has left the GBP curve confused. This doesn’t change the most important fact: rates are rising, pushed up by inflation fears
Rates are going up, but at different maturities in each currency
There are some nuances, but the central banks’ message, that markets overestimated the degree to which they will have to tighten in response to the inflation flare up, has landed. Helped by more subdued inflation than in other countries, the ECB has been most successful at this.
This has put the EUR long-end in the driving seat, while the front-end has successfully been re-anchored, sort of. Comparatively, the Fed has had less of an impact on market valuations and dynamics so it is still the belly, roughly speaking the 5Y area, that is in the lead. Meanwhile, the BoE’s contribution can only be described as confusing and GBP curve dynamics are more than ever in flux.
Consumer inflation expectations are the latest manifestation of the current trend
Now that we’ve established the most directional point on each of the USD and EUR curves, the question is which direction are they heading? The unequivocal answer is: up.
In our view, the recent barrage of central bank comments has helped ascertain which part of the curve will reflect current economic dynamics the most, it did not call into question a market regime characterised by bearish rates and inflation worries.
A further rise in consumer inflation expectations in the US, and another jump in energy prices in the EU, are the latest manifestations of a well-documented trend.
Markets should pay more attention to macro developments than central bank comments
Our conclusion is that, this week, markets should pay more attention to macro developments than central bank comments. If we are right on both counts, today’s US PPI print will contribute to push 5Y US rates up relative to 2Y and 10Y.
On paper, a further decline in the Zew sentiment survey in the Eurozone should flatten the long-end. We’re less confident of this, however, because of the circularity of this survey: in essence a survey of investors.
Nevertheless, the information value of a drop in the Zew today will be to confirm that economic expectations have been pared back, and so that it would not take much for subsequent data to surprise positively.
The 5Y point is the main conduit through which the curve will reflect rising PPI
