BONDS: Bunds Outperform Ahead Of U.S. Tariff Announcements

Bearish moves remain contained as participants await the “Liberation Day” tariff announcements out of the U.S. (scheduled for 16:00 ET/21:00 BST), providing some background demand for core global FI.

• EGBs outperform gilts, given perceptions surrounding higher EU sensitivity to tariffs and assumptions surrounding the prospect for deeper ECB easing if GDP growth is hit hard.
• Still, Bunds have failed to retest recent session highs and yields remain above the March 5 low (2.654%), which represents the base of the range seen since the “whatever it takes” fiscal stance was adopted.
• Yields flat to 2bp lower on the day, curve steepens.
• EGB spreads to Bunds biased wider, aided by a downtick in European equities ahead of the U.S. tariff announcement. Bund supply due shortly.
• ECB commentary fails to add to the debate, generally reaffirming well-documented themes. ~62bp of cuts priced through year-end, with ~19bp priced for this month’s meeting.
• Gilts underperform vs. Bunds (10-Year spread ~2bp wider) and with Tsys off yesterday’s highs.
• Futures within yesterday’s range and downtrend line resistance (92.42 today) remains untested.
• Yields ~2bp higher across the curve.
• 2s a handful of bp above March lows.
• 52bp of BoE cuts priced through year-end.
• ECBspeak from Schnabel, Lane, Holzmann and Escriva scheduled for today. Note that Lane will moderate a panel at the Bank’s AI conference, so don’t expect too much in the way of direct monetary policy comments from him.
• Little of note on the European & UK data calendars, which will leave focus on U.S. tariff decisions and data for much of the session.