OVERNIGHT NEWS
* European equity futures +0.6% after US House and Senate pass new $900bn virus emergency bill and $1.4tn funding for Federal agencies, VIX surged to a five-week high of 25.2 on Covid variant, €4.5bn EUR/USD option expiries today
* Brexit: Barnier briefing at 4pm CET, wires report progress/ possible landing zone on fisheries; UK/EU borders stay closed for freight and travellers; UK Parliament to sit on 30 December if there is a deal, UK final 3Q GDP revised up to +16.0% qoq
* Germany: DIW expects economy to contract 1% in 4Q 20 and by more in 1Q 21 due to new lockdown; consumer confidence index for January drops to six-month low of -7.3 from -6.8 in December
* Nikkei -1%, EUR 10y IRS unch at -0.26%, Brent crude -2.4% at $49.7/b, Gold -0.4% at $1,870/oz
A vintage year for govies: biggest decline in 10y benchmark yields in North America and Europe
COP: Banrep surprise market
By Santiago Calvache
COP found some correction on Friday on the back of mixed flows and a negative mood for risk assets. Nevertheless, we continued to see inflows from RM accounts in decent sizes. Corporate clients have continue to be very active but in mixed flows.
Locally, we had Banrep on Friday. Market expected a non event but the board surprised with a split voting (5-2) keeping rates unchanged. Governor Echavarria confirmed that the 2 votes were for a cut in rates. Overall, the split decision and the press conference signal that Banrep acknowledge that they might still have room for one additional cut but that they will wait for additional inflation data to take any further decision. The decision might add some pressure to the FWD curve. Added to this, during the weekend local authorities at Bogota and other major cities like Medellin changed some policies and moved back towards partial lockdowns, which were not seen since September signaling some concerns over growing Covid cases.
Today’s events should trigger a correction in COP that could take us back towards the 3,500 figure. Although I still like COP, long COP position should be crowded and scenarios like the one that is being seen today can trigger stop losses making it a larger movement. For today, I see 3440-3490 as range.