HYBRIDS: British Telecom (BRITEL: Ba1/BB+/BB+) Redemption Notice

A modest bid in German bonds on the back of Habeck reaffirming the known stance of the Greens when it comes to debt brake reform.

• While the Greens continue to voice their well-documented concerns surrounding defence spending, the door to fiscal negotiations and a deal in the immediate term seems to remain open.
• That explains the limited market reaction in German paper, with the major futures contracts already back from their knee-jerk highs.
• Long end ASWS vs. 3-month Euribor similarly muted, widening by ~0.5bp before fading.

The ECB’s forward-looking wage tracker is due at 1100GMT. The tracker is seen by the Governing Council ahead of each ECB meeting, but is only released publicly the Wednesday after the decision. The focus should be on negotiated wage growth excluding one-off payments, with the other series including lump sums exhibiting more volatility (see charts).

• In the January update, Q4 2025 negotiated wage growth excluding one-off payments tracked at 2.97%, a touch above the 2.92% tracking from the December 2024 vintage.
• Changes in negotiated wage growth should be expected to filter into overall compensation per employee growth. The ECB projected Q4 2025 compensation per employee growth at 2.8% Y/Y in the March macroeconomic projections.
• At the March press conference, President Lagarde noted that “recent wage negotiations point to a continued moderation in labour cost pressures”.
• As such, we expect the tracker to be broadly consistent with the ECB’s latest compensation per employee forecast.
• Note: The horizon of the tracker may stretch to Q1 2026 in the March update, but this has not been confirmed by the ECB.
• The data can be found here. In January, there was no accompanying press release to the raw data.

ECB President Lagarde's speech at the Economy Watcher's conference doesn't contain too much new or market moving. Two highlights:

• "A general conclusion emerges: when the size and distribution of shocks becomes highly uncertain, we cannot provide certainty by committing to a particular rate path. Otherwise, forward guidance may constrain policy agility in the face of abrupt changes to the inflation environment."
• "Trade fragmentation and higher defence spending in a capacity-constrained sector could in principle push up inflation. Yet US tariffs could also lower demand for EU exports and redirect excess capacity from China into Europe, which could push inflation down".
• "My main message is that in an environment of uncertainty, a strong commitment to maintaining price stability over the medium term is more important than ever"..."As a result, we will need to continue steering the public’s expectations. People will be looking to us – and other policymakers – to understand how we will navigate this more volatile era and help reduce, rather than amplify, uncertainty".