GREECE T-BILL AUCTION RESULTS: 13-Week GTB

• This morning has seen the release of Dutch and Austrian HICP - which both came in higher than January. (The Netherlands print was also higher than the 3 analyst expectations submitted to the Bloomberg survey).
• These prints help remove the downside risks from the Eurozone print (due at 10:00BST / 11:00CET) with our tracking estimate now appearing more symmetrical around 2.3%Y/Y (which is in line with the Bloomberg consensus).

The 2024 Italian budget deficit to GDP at 3.4% looks smaller than most had expected:

• The Bloomberg consensus for Italy's 2024 fiscal balance was -4.0% of GDP
• The EC's Autumn macroeconomic projections and the Italian 2025 draft budgetary plan projected a fiscal balance of -3.8% of GDP.
• We will provide further colour later this morning

Late on Friday Goldman Sachs wrote “given the modest boost to forward growth from higher defence spending in Germany, we are revising our Bund yield forecasts higher. We now expect 10-Year Bunds to settle at 2.25% by end-25, before reaching at 2.50% at end-27, compared with 1.90% and 2.00% previously”.

• Their “estimates suggest a permanent widening of the deficit of 0.5ppt could be worth 15-20bp on Bund yields, and together with a modest cyclical boost, this should see yields settle somewhat higher than previous expectations”.
• However, they caution that “with Bunds already pricing a reasonable degree of fiscal expansion (both on the outright level of yields and swap spreads), we think market expectations of a quick ramp-up are initially likely to be disappointed.”
• The go on to suggest that “changes to fiscal policy are unlikely to provide cyclical relief in the near-term, and given tariff risks remain substantial for European growth, we continue to expect to see lower front-end yields led by ECB cuts”.