European government bonds are set to start this year supported by the resumption of the central bank’s asset-purchase program and a decline in sovereign issuance.
After a year in which the European Central Bank (ECB) attempted to bolster inflation through its 60 billion euro (US$65 billion) a month bond-buying plan, the first major economic report of this year is likely to show that consumer-price growth remains a fraction of the central bank’s goal.
Investor demand for bonds could also be underpinned by Germany paying around 23 billion euros of redemptions due tomorrow, the same day as ECB bond purchases, which were halted on Dec. 21 before the holiday period, resume.
The data, due on Tuesday, is expected to show annual inflation in the currency bloc accelerated to 0.4 percent last month, the median forecast of economists in a Bloomberg survey said.
While that is up from 0.2 percent in November, it is still short of the ECB’s desired rate of just under 2 percent. At their latest policy meeting on Dec. 3, officials cut the deposit rate to minus-0.3 percent and extended the central bank’s quantitative-easing plan by at least six months.
“Most European events will favor a bond-positive start to the year and we will probably get that,” Helsinki’s Nordea Bank AB chief strategist Jan Von Gerich said.
“The ECB in terms of further easing has very much left the door open and at the very least they will cut the deposit rate once again. If you look at the dynamics in terms of supply and demand, you have most countries seeing lower issuance and at the same time you have the ECB buying,” Von Gerich said.
Benchmark German 10-year bunds yielded 0.63 percent as of the 5pm London close on Wednesday last week, the final trading day last year. The price of the 1 percent security due in August 2025 was 103.45 percent of face value. The bund yield rose from 0.54 percent in December 2014. Last year it reached a record low of 0.049 percent in April and climbed to its peak of 1.06 percent two months later.
Italian 10-year bond yields ended the year at 1.60 percent, down from 1.88 percent at the end of 2014. They touched a record-low 1.031 percent in March, the month the ECB started its asset purchases. Similar-maturity Spanish yields closed last year at 1.77 percent, up from 1.61 percent in December 2014 and a record-low 1.048 percent in March.
Euro-area sovereign securities returned 1.70 percent last year, Bloomberg World Bond Indexes said, adding to a gain of 13 percent in 2014. They outperformed US peers, which made 0.7 percent last year and UK gilts, which earned 0.2 percent.
International sovereign-debt markets were dominated last year by the ECB’s unprecedented bond-purchase program and the US Federal Reserve’s decision to raise interest rates for the first time in almost a decade.
This year the possibility of a referendum on Britain’s EU membership is likely to capture investors’ attention, though the uncertainty around the vote might be a risk to UK assets.
The UK benchmark 10-year gilt yields climbed from a record low set in January last year. The Bank of England (BOE) held interest rates at an all-time low throughout the year despite signals at times that an increase was approaching sooner than the market was pricing. With UK economic growth slowing, markets have not fully priced a move by the BOE until the end of this year.
“Gilts have been a bit of a sideshow,” said Azim Meghji, the London-based head of UK fixed income at Santander Asset Management, which manages the equivalent of US$170 billion.
“The focus for most investors has been what the ECB are going to do and what the [US] Fed will do and those have been two competing themes throughout 2015, which has left gilts at the mercy of where the broad market for government bonds has gone,” Meghji said.
The benchmark 10-year gilt yielded 1.96 percent as of 1pm close on Friday in London. The yield dropped to a record-low 1.325 percent on Jan. 30, last year and peaked at 2.21 percent in June.
With UK inflation near zero and the outlook for international growth remaining shaky, BOE officials have less incentive to raise interest rates. Recent data showed wage growth, a key focus of deciding monetary policy, had slowed and so policymakers can remain cautious for the time being, Meghji said.
“After 2014 being a blockbuster year, 2015 being a mediocre year, I wouldn’t expect 2016 to be significantly different at this stage than the year we just had,” Meghji said.
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
Sales in the retail, and food and beverage sectors last month continued to rise, increasing 0.7 percent and 13.6 percent respectively from a year earlier, setting record highs for the month of March, the Ministry of Economic Affairs said yesterday. Sales in the wholesale sector also grew last month by 4.6 annually, mainly due to the business opportunities for emerging applications related to artificial intelligence (AI) and high-performance computing technologies, the ministry said in a report. The ministry forecast that retail, and food and beverage sales this month would retain their growth momentum as the former would benefit from Tomb Sweeping Day
Thousands of parents in Singapore are furious after a Cordlife Group Ltd (康盛人生集團), a major operator of cord blood banks in Asia, irreparably damaged their children’s samples through improper handling, with some now pursuing legal action. The ongoing case, one of the worst to hit the largely untested industry, has renewed concerns over companies marketing themselves to anxious parents with mostly unproven assurances. This has implications across the region, given Cordlife’s operations in Hong Kong, Macau, Indonesia, the Philippines and India. The parents paid for years to have their infants’ cord blood stored, with the understanding that the stem cells they contained