The UK calendar is light today, but the Bank of England releases its quarterly inflation attitudes survey, which is expected to confirm a fall in inflation expectations. With CPI inflation expected to fall below the 2% target in near term and interest rates likely to have bottomed at 0.5%, the BoE began quantitative easing yesterday which has led to a significant fall in bond yields. The DMO this morning will offer £1.1bn of index-linked gilts, while MPC member Barker speaks this evening.

In the euro zone, German industrial output figures are likely to have fallen sharply, especially after yesterday's 8.0% plunge (-37.9% y/y) in factory orders. Hence, it seems likely that the ECB will cut interest rates at its next meeting in April and may move towards 'non-standard' policy measures. ECB speakers today include President Trichet and member Nowotny in Vienna. The ECB monthly bulletin is also due.

Elsewhere, the Swiss National Bank is expected to keep rates on hold at 0.5%, but there is a risk of a reduction to 0.25% and the announcement of new measures to bolster liquidity.

In the US, retail sales, initial jobless claims and business inventories are the key releases. Retail sales in January rose unexpectedly by 1%, but are forecast to fall 0.6% in February. However, as the chart shows, retail sales were down 9.0% in year-on-year terms, as the labour market situation deteriorates.

In terms of issuance, the US Treasury offers $11bn of 30-year bonds. With US 30yr bond yields rising, the question is whether the BoE's policy of gilt purchases has increased the likelihood of the Fed eventually following suit in buying treasuries. It could decide to do so at the FOMC meeting next week.

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