Another quiet trading session for Asia resulting in mixed signals with little headway made. All core markets closed within 0.10% of their previous close. China Industrial production rose (6.3% while estimate were 6.2%) for the first couple of this year but were disappointed as Retail Sales released at 9.5% against an expected 10.5%.

The BOJ will be highlighted again later this week when we are hoping to hear more details surrounding their bond-buying plan and the official Y80tln a year figure. One of the problems they have is that maturing existing holdings are off-setting fresh buying, but also that they hold purchasing rate at zero. Given we are seeing US bonds hitting new recent highs in the past few weeks (today’s 10’s are trading 2.62%), 10yr JGB’s are hardly likely to remain 0.04% and 0.015% as BOJ buys 5-10yr paper. Guess they could move to a monthly target as a way of avoiding telling the market the tapering that is happening is not really happening!

Either that or they move away from the super-longs and effectively have two curve! Thursday’s meeting will hopefully shed some more light on this semi-technical policy.

All the talk in European hours was the slide in GBP and why the market hit it today after the news came yesterday. Just because we saw a slide today, the talking heads find it baffling that the move was not immediate. It takes time – even for news to sink in and even then the reaction may not be the move. Funny how traders tend to give an excuse for every tuck and turn while attempting to estimate the long term move. GBP was down 1% as PM Theresa May addressed Parliament and then we saw a small recovery. There is far too much to comprehend this week than attempt to apply an explanation for every move. By the end of the week we will have heard from four key CB’s and started the G20 meeting at the weekend, all this and geopolitical concerns thrown in should be interesting to say the least! Figures from OPEC upset the oil market after they revealed inventories have continued to rise with plenty of talk around Saudi supply, but they did claim the excess is for storage. Mid-afternoon we heard Francois Fillon had been placed under formal arrest – didn’t really move markets although it will add to continued uncertainty.

US session was also very much in the wait and see mode on the eve of the Federal Reserve meeting. Even better than expected PPI (estimates for 2% with actual released at 2.2%) failed to move core indices that much. By the close we were looking at around -0.3% declines across the board but once tomorrow is out of the way, the market can settle down for the rest of the weeks agenda. Markets still appear happy owning the USD certainly as far as GBP is concerned but we still have lots to digest yet. No surprise really that energy stocks were the worst performer on the day.

US Treasuries were under pressure earlier in the day (2.6275% 10’s) but caught a bid when stocks declined. 2’s closed 1.38% (+1bp), 10’s finally closed 2.60% (-1bp), Bunds at 0.44% (-3bp) closes US/Germany at +216bp (+2bp). France closed 1.08% (+0), Italy 2.33% (-2bp), Greece 7.11% (+13bp), Turkey 11.07% (+7bp), Portugal 3.92% (-4bp) and Gilts 1.22% (-2bp).