EU BASIC INDUSTRIES: Airbus (AIRFP A2[P]/A/A-[P])

Fed pricing also reflective of what we have seen further out the curve, with dovish moves on the day aided by ongoing U.S. growth concerns, although Friday’s ranges intact.

• 79bp of cuts priced into Fed Funds through December (vs. ~71bp late Friday), with 11.5bp of easing priced through May and ~30bp showing through June.

The major crude oil benchmarks have traded back towards session lows as equity markets falter.

• Headlines pointing to the potential reopening of the Israel-Hamas conflict may have factored into London morning crude demand, before broader risk sentiment became a more prominent driver through the NY crossover.
• Ongoing questions surrounding Chinese demand and U.S. economic growth are also crude-negative.
• Initial support levels of note located some distance below prevailing prices at the March 5 lows ($68.33 for Brent & $65.22 for WTI), with the bearish technical theme intact in both contracts.

Goldman Sachs think “2s10s core EGBs curves will continue to steepen and forecast a move around 35bp above the forwards this year”.

• At the same time, they suggest that “higher German issuance will not only manifest as higher term premium, but upside growth risks in coming years will likely affect market perceptions of terminal rates”.
• For this reason, they think “forward rates can actually flatten, such as 2y2y vs 5y5y even as the spot curve steepens”.
• They also “continue to see swap spread tightening as offering the least compelling risk reward vs. steepeners or outright belly shorts, given the valuation constraints and global tailwinds to wider spreads, for example from potential U.S. bank regulatory changes”.