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Spreads wider, growth slides

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  • With a volatility that does much to dispel the idea of the rational markets hypothesis, Euro peripheral bond market spreads widened yesterday. The weak nominal growth story in the Euro area is not exactly new information, of course.
  • Nominal GDP matters to fiscal positions, and several Euro area countries have yet to see much recovery here - Italy has barely grown since the crisis, and the Spanish economy is actually smaller in nominal terms.
  • Japanese industrial production gave a somewhat mixed picture, being revised stronger in March but with subdued expectations for the coming data. This matters given that it is the post first quarter momentum that is likely to determine the ability of Japan to escape deflation.
  • US Fed Chair Yellen said little in her remarks (other than pledging support for small businesses). Consumer sentiment (Michigan, preliminary) and housing data are due from the US, and we have modestly positive expectations for both.

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