The weekend was marked by Moody's decision to downgrade its US credit rating to 'Aaa' with a negative outlook (the next downgrade would see the rating move to 'AA').

This decision was greeted without emotion by the US bond market, with T-Bonds downgraded by +2pts to 4.6470%, a totally trivial and insignificant change, against a backdrop of lower volatility than in previous sessions (November 8, 9 and 10).

Moody's decision is not the only worry that could have preoccupied holders of US debt: there is also the risk of a shutdown if the ceiling on federal spending is not raised.

But since this is an annual soap opera that has been going on for decades (the Clinton era, before the year 2000) and always ends with the vote for an 'extension' of tens or hundreds of billions, Wall Street doesn't really care.

In Europe, bonds remained at a standstill throughout the day, with OATs perfectly stable at 3.293% and Bunds almost perfectly stable (+0.5Pt at 2.715%)... and Italian BTPs perfectly stable at 4.5700%.

There were no 'stats' this Monday to liven up trading, so we're experiencing a 'transitional' session... with no initiatives and no technical signals.
The week gets off to a slow start, but promises to be rich in 1st-rate 'macro' data, including the latest US inflation figures, as well as retail sales and new data on the US housing sector.

These indicators should confirm that a slowdown in the global economy is indeed underway, but also that inflation is easing only very gradually.
A number of important statistics are also expected in Europe, including October consumer prices, the second estimate of third-quarter GDP and the ZEW index of German investor sentiment.

These data could lead to renewed volatility in the bond compartment, which has already been subject to major roller-coaster movements of late.

Last week ended with divergent developments on both sides of the Atlantic, with a pullback in euro-denominated debt and a small technical upswing in T-Bonds despite Thursday's air pocket due to the semi-failure of a US Treasury issue.

Volatility on the long end of the yield curve remains very high, with curves still inverted despite the recent movement, which leads us to maintain a preference for the short end of the curve", stresses François Rimeu, senior strategist at La Française AM.

For the first time in 15 years, the normalization of interest rates and more resilient inflation than expected have made investing in bonds more attractive than in equities", points out Mauro Ratto, co-founder and co-investment director at Plenisfer.

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