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From the Floor: Inflation critical for European bonds — #SaxoStrats

Michael S. McKenna
   • German bund yields retreat after strong CPI release
   • ECB head Draghi's Jackson Hole addess crucial for EU bonds
   • US yields under pressure on pallid Q1 growth

SaxoStrats
By Michael McKenna

Note: Today's morning call was unfortunately delayed and cut short due to technical issues. We will return with a full roster of strategists tomorrow, August 1, at 0840 CET.

"Inflation," says Saxo Bank fixed income trader Michael Boye, "is the only thing holding the European Central Bank back from tightening policy."

This of courses places this morning's euro area inflation print in focus, as well as the Italian provisional CPI release (both are due at 0900 GMT). It also places a great deal of focus on European Central Bank president Mario Draghi's appearance at the Jackson Hole forum (August 24-26), as investors expect Draghi to announce a taper starting in September or October.

Elsewhere Greece has returned to international bond markets for the first time since 2014, selling $3 billion worth of five-year notes at a yield of 4.625%. As Boye noted, demand was not overwhelming but could still be categorised as fairly strong and the yield stands at the lowest level since 2009.

Athens
Greece returned to bond markets with investors showing a degree of confidence in the country's economic future. Photo: Shutterstock

Michael McKenna is an editor at Saxo Bank 

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