Tuesday 24, October 2017 by William Mullally

Bonds cautious ahead of ECB meeting

Mihir Kapadia, CEO and Founder, Sun Global Investments

Bonds are relatively unchanged. Treasury prices edged slightly on Monday as investors paused to wait for clarity over whom Donald Trump will nominate to lead the Fed. The yield on the benchmark 10-year US Treasury is 1bp lower at 2.37 per cent. As noted yesterday there are a number of potential candidates for the Fed Chair with John Taylor and Kevin Warsh known to be more hawkish while current Fed Governor, Jerome Powell and of course Janet Yellen seen as more gradualist and dovish. Mr Trump has said he would like to name his pick before his 3 November trip to Asia.

Bond Markets are also likely to be cautious ahead of the ECB meeting on Thursday where it is expected to reduce monthly bond purchases from Euro 60bn a month to Euro 25bn to 30bn for the first nine months of 2018 which is the period that the current programme of bond buying has left. ECB has indicated the interest rates will be left unchanged for some time. Although the reduction in bond buying has been well flagged, the “announcement effect” may still cause some decline in European bond prices.