EGBS: Bund Futures Off Session Lows But A Bear Cycle Still In Play
Bund futures have moved away from session lows, maintaining a close correlation with Brent crude price action. However, a bear cycle remains intact, reinforced by this morning’s piercing of key support at 125.90, the Dec 22 low. Bunds are currently -11 ticks at 126.07, but a resumption of weakness below today’s 125.73 low would expose Fibonacci projection levels at 125.49 and 125.25.
- Sensitivity to Iran war headline flow remains acute. Although US President Trump told G7 leaders that Iran is “about to surrender”, rhetoric from both the US and Iranian side yesterday suggests an end to the conflict is not imminent.
- 10-year Bund yields opened at 2.992% this morning, but have since eased back a little to 2.955%
- The German curve has lightly twist steepened, with 5s30s up 2.6bps to 92.9bps.
- 10-year EGB spreads to Bunds are wider once again, with European equity risk sentiment on the back foot. The 10-year BTP/Bund spread is at 82bps, with focus on whether it retests the 85bp level.
- Italian January industrial production was weaker than expected this morning (-0.6% M/M vs +0.4% cons). There is plenty of US data due this afternoon, but all the focus is on Middle East developments ahead of the weekend.
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US TSY FUTURES: FV Blocked
Latest block trade lodged at 09:11:12 London/04:11:12 NY:
- FVH6 2,650 lots blocked at 109-11, looks like a seller. DV01 ~$114K.
ECB: Negotiated Wage Growth Still Below 3% By End-26, Another Upward Revision
The ECB’s forward looking wage tracker continues to indicate negotiated wage growth of just below 3% by the end of this year. Note that at last week’s press conference, President Lagarde stressed that “the contribution to overall wage growth from payments over and above the negotiated wage component remains uncertain” – this followed the stronger-than-expected compensation per employee reading in Q4 2025.
- The wage tracker excluding one-off payments was 2.693% in the February updated, up from 2.681% in December.
- Note that upward revisions have become common in this series. For example, the Q2 2026 reading of 2.650% was 2.582% in December and 2.489% in October.
- From the ECB’s press release: “The rise in the wage path over the course of the year is related to the dissipation of the mechanical downward effect of large one-off payments that were made in 2024 but not in 2025. These mechanical effects are expected to virtually disappear over the course of 2026, and the wage trackers with one-off payments (smoothed and unsmoothed) and without one-off payments are expected to converge as such payments become less relevant. The ECB wage tracker also suggests that there is less dispersion in negotiated wage pressures across the different euro area countries in 2026 than in previous years.”
- “As new agreements are being signed and coverage of contracts reaching beyond 2026 is gradually increasing, the forward-looking horizon of the wage tracker will be extended to the first quarter of 2027 in the July 2026 data release.”
FOREX: FX OPTION EXPIRY - Large Expiry in the EUR Friday
Of note:
EURUSD ~1bn at 1.1900.
USDJPY 1.67bn at 154.00 (thu).
USDCNY 1.1bn at 6.9000 (thu).
EURUSD 11.18bn between 1.1850/1.1955 (fri).
USDCNY 1.2bn at 6.9000 (fri).
- EURUSD: 1.1825 (1.52bn), 1.1850 (792mln), 1.1870 (451mln), 1.1900 (934mln), 1.1950 (371mln), 1.2000 (2.17bn).
- GBPUSD: 1.3640 (362mln).
- USDCAD: 1.3500 (282mln), 1.3540 (300mln).
- USDCNY: 6.9000 (500mln), 6.9200 (678mln).
