The needle of the compass

The ECB only has one needle in its compass. ' The primary objective of the ECB’s monetary policy is to maintain price stability. The ECB aims at inflation rates of below, but close to, 2% over the medium term. '

Well the flash estimate for CPI just came out at 3.5%, the euro had firmed up some more against the majors. Spanish CPI came out this morning at 4.6% yoy. Fixed income didn't really bat an eye lid. Bund volume is light at 225k lots. It would appear that the needle of the compass is not doing its job. Perhaps the medium term history will prove to judge otherwise.

Last Trading day of March

Last day of the month tomorrow so will need to keep an eye out for any duration buying. We have a few figures out tomorrow to get our teeth into. These include (times in BST):

9:00 Euro Zone m3
10:00 Eurozone Flash CPI estimate
14:45 Chicago NAPM

There are a few other odds and ends out but I will be focusing on these numbers. I will be paying close attention to the loans to private sector of the M3 release to see if the squeeze in the euro libor rate has started to have more of an effect. Obviously the CPI flash will be closely watched but the surprise will be more so if the figure should come in lower as the ECB as already tee'd the market up for the CPI ticking up in the short run. It seems from watching the equities that people are beginning to look beyond the recession in the states. It wouldn't surprise me if the spin on a low Chicago number is that its a low point and we pick up from here. Either way the employment component will be watched for clues with Fridays NFPR.
Euro Yields at close on Friday were (2,5,10) 3.49%, 2.88%, 3.94%
US Yields at close (2,5,10) 1.64%, 2.49%, 3.44%

I am not sure why the Eurozone 5 year is so low but it doesn't look right to me and I feel it should be much higher.