Tuesday, June 2, 2015
- A rise in core European inflation to 0.9% in May from 0.7% a month earlier has set off a 2.5% rally in the euro (NYSEARCA:FXE) and soaring bond yields across the Continent.
- The German 10-year Bund yield is up 18 basis points to 0.72%, the Italian 10-year is up 17 bps to 2.12%, and the Spanish 10-year is up 14 bps to 2.05%. In the U.K., 10-year Gilts are higher by 13 bps to 2.00%.
- The action has set off a big move in the 10-year U.S. Treasury yield, up eight bps on the session to 2.26%. TLT -1.45%, TBT +2.9%
- ETFs: TBT, TLT, TMV, TBF, EDV, TMF, EU, TTT, ZROZ, TLH, SBND, VGLT, UBT, DLBS, TLO, BUNL, TENZ, LBND, BUNT, GGOV, DLBL, TYBS, VUSTX
- "There may be reasons not to ignore the recent [weak economic] readings entirely," says Fed Governor Lael Brainard, noting if the weakness in Q1 were due to transitory factors (or poor seasonal adjustments), one would have expected a quick rebound in Q2, but this hasn't happened.
- "My own reading is that earlier, more optimistic growth projections may have placed too much weight on the boost to spending from lower energy prices and too little weight on the negative implications for aggregate demand of the significant increase in the foreign exchange value of the dollar and large decline in the price of crude oil."
- The data so far, she concludes, argue for more time to confirm further improvement in the labor market and firming of inflation toward the 2% target.
- Brainard come over from Treasury to join the Fed Board of Governors one year ago, but today marks her first speech on monetary policy.
- M&A activity hit an all-time monthly record in May, surpassing the previous highs seen during the height of the dot-com bubble and peak of the debt boom that led to the 2008 financial crisis.
- The overall value of U.S-bound deal-making amounted to $243B in May, compared to $226B during the same month in 2007 and $213B in January 2000, the previous biggest and second biggest months respectively.
- Recent M&A: Avago confirms Broadcom purchase (May. 28 2015); Charter to merge with Time Warner Cable, buy Bright House (May. 26 2015).
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