While ECB officials talk tough and managed to nudged rate cut bets there into April, the weakness of Germany’s economy last year and plunging inflation expectations among European households support bullish rate markets.
Bank of England chief Andrew Bailey, speaking in parliament later on Tuesday, will also be cheered by news of ebbing wage inflation.
U.S. rates markets continue to chomp at the bit.
Fed futures still see almost 160 basis points of rate cuts this year, with more than a 70% chance they start in March.
Two-year Treasury yields – which had plunged to their lowest since May on Friday – have firmed up about 10bps since to 4.21%, but ten-year yields remain unchanged. A sharp disinversion of the 2-10-year yield curve this month to its narrowest levels in about 18 months took a breather Monday.
A record 91% of global investors expect lower short-term bond yields in 12 months’ time, a January survey of fund managers published by Bank of America on Tuesday showed.
With Goldman Sachs and Morgan Stanley up later in what’s been a mixed fourth quarter earnings picture for the big banks so far, Wall St stock futures were off about 0.5%.
Some merger activity also caught attention.
U.S. private equity firm General Atlantic said on Tuesday that it has entered into an agreement to buy UK-based infrastructure investor Actis.
And brokerages Panmure Gordon and Liberum on Tuesday announced an all-share merger to create what they say will be the UK’s largest independent investment bank.
