By ITC Markets
Wed 05 Sep 2012 14:44:54 CT
A Look to Europe: Spain will reopen the 2-year 3.4% 04/14, tap the 3-year 4.0% 07/15 and also tap the 4-year 4.25% 10/16 SPGB for a combined size of €2.5-3.5bn (equivalent to 8k Bund futures). Then, France will tap the 5-year 4.25% 10/17 OAT, the 10-year 3.0% 04/22 OAT and issue a new 15-year 2.75% 10/27 OAT for a combined of €7.0-8.0bn (equivalent to 63k Bund futures).
In terms of economic releases, the Eurozone will release the Flash Q2 GDP which is estimated to remain unchanged at -0.2% q-o-q and -0.4% y-o-y. Analysts expect a small positive contribution from net trade but a negative one from consumer and government. Next, Germany will report the July Factory Orders with analysts forecasting a 0.3% growth m-o-m (vs. -1.7% previously). They expect sentiment in Germany's manufacturing sector to have deteriorated further and they anticipate further weakness in industrial orders in July.
The BoE will announce the September Rate decision and QE Target, consensus expect them to remain steady at 0.5% and £375bn, respectively. Analysts note the BoE is likely to keep policy unchanged in September. The MPC seems somewhat divided, with some members already seeing a strong case for more QE while others didn't vote for the last round in July. There is already plenty of policy in the pipeline and until it can make a proper assessment of the effectiveness of the Funding for Lending Scheme, they think the MPC will be in wait-and-see mode. Last, the ECB will announce the rate decision for September which is projected at 0.5% (vs. 0.75% previously).
Full ECB preview to follow.
US Economic Data Releases: The ADP Employment is due at 08:15EDT/13:15BST, consensus is for a decline to 145k (vs. 163k last month). Analysts note that the ADP employment growth has averaged 155k/month for the last three months. This compares with an average gain of 120k in private-sector employment according to official tabulations from the Bureau of Labor Statistics.
At 08:30EDT/13:30BST, Initial Jobless Claims (wk 01 Sept.) are expected to fall slightly to 370k (vs. 374k last week).
At 10:00EDT/15:00BST, the ISM Non-Manufacturing Index (August) is expected to decline slightly by 0.1 points to reach 52.5 (vs. 52.6 last month), which would be below the average in Q2 (53.1) and Q1 (56.7) but consistent with a modest expansion in service sector activity.
Fed Op: At 11:00EDT/16:00BST, the Fed are due to purchase $1.5-2.0bn in the 24-30y sector, covering 02/36-08/42 maturity bucket. Tuesday's operation saw the sub/cover come in below recent operation at 2.5x (vs. 2.6x, 2.3x and 3.4x previously). Purchases were well distributed all across the bucket - likely due to the tight valuations in the sector - securities bought in the largest amount were the 11/39s and 08/41s for a respective size of $0.45bn and $0.38bn.
Supply: No supply for the day. However, the size announcements for next week's 3y, 10y and 30y auctions are due at 11:00EDT/16:00BST, consensus is for a respective size of $32bn, $24bn and $16bn.
Key Speakers/Events: No key speakers scheduled for the day.
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