The 10y USTs was only a bp or 2 higher at the end of the week, this did not mean all was quiet though. The FOMC in a pre-meeting blackout period allowed the market to wander 15bps back and forth. An impending decision on the reintroduction of the SLR, a banking balance sheet restriction that was lifted during the mayhem of last year, was identified as causing some of the move higher in rates.
Contrary to the current reflationary theme, one of the more popular crypto currencies announced that it was to introduce a new payment mechanism limiting its “printing” process, as such this was going to be deflationary.
North America
US: Feb inflation showed little of this year’s expected uptick, with core CPI at +0.1% MoM (0.2% exp., 0.0% prev.), +1.3% YoY (1.4% exp., 1.4% prev.) and core PPI +0.2% MoM (0.3% exp., 1.2% prev.) and +2.2% YoY (2.5% exp., 2.0% prev.) The University of Michigan data showed an uptick in consumer sentiment and a small drop-in short-term inflationary expectation to +3.1% (3.3% exp., 3.3% prev.)
Canada: The March Bank of Canada meeting left policy rates unchanged at 0.25% (0.25% exp., 0.25% prev.). The statement referenced continuing confidence in the recovery and that economic slack will be absorbed into 2023. Feb employment figures were strong, with the net change +259.2k (75.0k exp., -212.8k prev.); the unemployment rate showed improvement, dropping to +8.2% (9.2% exp., 9.4% prev.) and the participation rate held steady at +64.7%. Only 4Q capacity utilization rate hinted at economic slack, ticking higher to 79.2% (77.8% exp., 76.5% prev.)
Europe
Eurozone: The ECB kept policy rates unchanged, with the refi at 0.0% (0.0% exp., 0.0% prev.) and the depo at -0.5% (-0.5% exp., -0.5% prev.). In the press conference, the new “needle in the compass” – financial conditions – was presented. Additionally, the updated ECB staff forecasts showed inflation missing the bank’s target and this has now been the case for 3rd quarters in a row. To counter this miss, an “significantly” increased pace of PEPP purchases was announced. However, the PEPP announcement wasn’t very convincing as the option of not using the PEPP’s full allotment was also mentioned and the definition of financial conditions was a little vague, leaving the market somewhat unsatisfied.
Eurozone Jan industrial production was better than expected. French 4Q payrolls dropped -0.1% (-0.1% exp., 1.6% prev.) Jan industrial and manufacturing production was better than expected. German Jan industrial production was weaker than expected and trade figures were mixed. Italian Jan industrial production was weaker than expected but seasonal adjustments made comparisons difficult. The quarterly unemployment rate improved to +9.2% (9.8% prev.)
Sweden: Swedish Jan services production, industrial production and industrial orders were weaker than expected. Jan household consumption was better than expected.
Norway: Norwegian Jan mainland GDP was better than expected at -0.2% MoM (-0.6% exp., 1.0% prev.) and Feb core CPI was higher at +0.4% MoM (0.6% exp., 0.1% prev.) bringing the annual measure to +2.7% YoY (2.9% exp., 2.7% prev.). PPI, which is more volatile and includes energy, is now at +9.7% YoY (0.6% prev.)
Japan
Data was mixed, with Jan household spending weaker -6.1% YoY (-2.1% exp., -0.6% prev.) and Feb machine tool orders stronger 36.7% YoY (9.7% prev.)
UK
Jan industrial and manufacturing production was weaker than expected, with construction and services printing stronger than expected, but not significantly so.
Australasia
Australia: Australian surveys of business and consumer confidence showed an uptick. New-Zealand business and manufacturing activity measures were stable and consumer measures showed a drop in credit card spending and strong growth in house prices, something the RBNZ will be keeping an eye on.
New Zealand: No tier 1 data.
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