With Europe coming back from Easter holiday today markets will be digesting the news over the holiday. Sentiment has improved markedly on the back of the better-than-expected earnings from investment banks and new Fed initiatives to revive the mortgage market. Bond yields in Euroland are likely to open 5-10bp higher today to catch up with the move in US yields as more money comes out of the shelter and find its way to riskier assets again.
The key question this week will be whether this improved sentiment can hold up. For now it seems to hold but overall we are still in a downward trend in most bond markets. The short end in the US now only prices 35bp in additional cuts, which we think is too little. Hence some value is starting to build here. On the macro front, the market has mostly focused on the good news such as a rebound in existing home sales, whereas weak jobless claims numbers (rose to from 356k to 378k last week) did not get any attention. Today we get more data in the US with the release of CaseShiller house prices (consensus -10.5%, last – 9.1%) and consumer confidence (consensus 73.5, last 75).
Looking ahead key data will be German ifo index (Wednesday), US durable goods orders and new home sales (Wednesday) and US core inflation/spending numbers (Friday).