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MARKET INSIGHT

Today's data calendar is light, so focus will remain on broader market themes today.

  • ECB policy is in focus after an interview from Austrian CB Governor Holzmann who said he looks at the balance sheet and interest rates independently and that rates could be hiked while the ECB is still buying bonds. Holzmann is of course one of the most hawkish ECB Governing Council members, but his comments still have the potential to spook the market a little (and are probably partly behind the increase in Schatz yields). Balancing this somewhat is an FT sources piece that suggests some GC members want to postpone the post-PEPP decision past December so that more is known on the Omicron variant. This chimes with a Reuters story from last week and is probably one of the drivers of tighter peripheral spreads this morning.
  • In the UK, after yesterday's comments from Broadbent we have seen more sellside forecasters move away from forecasting a December hike. After Saunders' comments Friday (where the hawk didn't sound committed to voting for a rate rise in December), market reaction was limited.
  • Omicron news will still likely be the biggest driver for the market, particularly Treasuries that have a higher beta to developments than EGBs/gilts. After some weak German, UST and gilt auctions recently, today's issuance will be watched more closely than normal.

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