Friday is inflation day.
A quiet week for economic data springs into life with reports on Japanese jobs and industrial production; French consumer spending; German unemployment; UK GDP; and US personal income and consumer sentiment.
Prices will be a constant theme, with various inflation iterations presented by Japan, France and the US — the latter in the form of the PCE deflator.
But arguably the most intriguing inflation metric will be the “flash” eurozone Harmonised Index of Consumer Prices (HICP) for February.
Intriguing because while the HICP is expected by analysts to be 1.8 per cent, down from 2 per cent the month before, the benchmark 10-year eurozone bond yield, as presented by the German Bund, is below 0.4 per cent.
Still, as we have noted before, many in the market seem accepting of this deeply negative real yield offered by Bunds, providing they perceive EU political risk and continued bond-buying by the European Central Bank.
RBC Capital Markets said it thought investors had become nervous with the idea that the ECB was minded to temper its largesse.
And therefore they have welcomed a Reuters story quoting ECB officials that suggested the central bank was “uncomfortable” with the amount of rate increases forecasted by futures markets.
“We furthermore reiterate that against this backdrop Bund yields can fall further, at least towards the middle of the 20-40bp range,” says RBC.