How will transition from LIBOR to the new money market benchmarks be executed?

Macroeconomic environment Italy : industrial production declined by 1% mom but increased by 2.9% yoy in July (wda series). In the US, total net TIC flows were at USD 52.2bn in July Equities In Europe, equity markets generally closed in the green on Tuesday. The one exception was the FTSE 100 that closed flat. At sector level, consumer staples were the only sector to close in the red. In the US, equities where up as well, while the VIX remained close to 13%. But the best performers have been Asian equities , on the hope of an easing of trade tensions . Bond markets / Derivatives The German sovereign yield curve underwent a slight steepening through the long end, with the yield for the 10-year Bund adding 2bp. BTP continued to outperform, this time with an outperformance by short and intermediate maturities. In particular, yields eased by 9bp at 5 years and by 6bp at 10 year. Although the euro 10-year swap spread recovered slightly on Tuesday, it remains on a downtrend, currently sitting at 49bp. In the US, the yield for the 10-year TNote broke cleanly above the 3% resistance, leading to a 3bp steepening of the 10- 2Y segment. The 10-year swap spread extended its decline, down to 5.7bp. Money markets / Central banks Further decline of the US 3-month Libor -OIS spread, which now sits at just 18.4bp, a new low since last December. The EFFR remains scotched at 1.92%, just 3bp off the IOER. The SOFR climbed to 2%. All Libor contracts were on the back foot yesterday, but it was the Eurodollar contracts that recorded the sharpest declines. Implied rate for certain contracts, notably back-ends, rose by more than 4bp. FX Very limited movements by G7 currencies. The sterling kept rising on the increasing hope of an accord on the withdrawal agreement. Tu r ning to emerging currencies, the Turkish lira weakened by 0.92% against the USD dollar, whereas the Russian ruble put on 1%. Commodities Crude oil price appreciated yesterday, notably after comments by a Saudi official stating he was comfortable with Brent trading above $80/bbl. This is at odds with previous announcements suggesting Saudi Arabia wanted to keep crude in the $70 to $80 band.