RUSSIA: CBR Will Assess Need for "A Further Key Rate Cut"

Gilts have recovered from early London lows alongside peers.

• Futures +4 at 92.39.
• Bulls remain in technical control after the break of several key resistance levels last week.
• Resistance is now layered in at 92.62/72/91, while initial support is located at 91.84.
• Yields flat to ~1bp lower, 10s outperform on the curve.
• The ’25 low in 10s (4.363%) remains untested and protects the base of the upward sloping triangle we have previously identified (4.339% today).
• The presence of this morning’s GBP4.5bln 4.75% Oct-35 gilt auction didn’t provide much in the way of concessionary headwinds. The auction ultimately generated strong demand (highest bid-to-cover at a 10-year auction since August and the second highest ever volume of bids at a 10-year gilt auction), factoring into 10-Year outperformance.
• Comments from BoE MPC member Taylor reaffirmed his well-known dovish stance. He noted that “we can now see inflation at target in mid-2026, rather than having to wait until 2027 as in our previous projection. I see this as sustainable, given cooling wage growth, and I now therefore expect monetary policy to normalise at neutral sooner rather than later, as I said in the December minutes.”.
• GBP STIRs essentially flat on the day, 44bp of easing priced through year-end, next 25bp step not fully discounted until the end of the June MPC.

• In contrast to JPY weakness that pervaded across the first few sessions of the week, the currency is stronger on the day headed into the NY crossover, helping press USDJPY back below Y159.00 and EURJPY back below Y185.00.
• Moves follow slightly more forceful language from Japan's Katayama, who again stressed how "deeply concerned" the authorities are on sudden currency weakness, and has kept the prime minister's office informed on options available and the trajectory of markets.
• Takaichi's junior coalition partner confirmed the plans to dissolve parliament and run early lower house elections, helping again affirm concerns around fiscal risk stemming from greater LDP control of the Diet. This, as well as the possible knock-on impacts on inflation from new government measures is again a JPY negative.
• Outside of Japan, GBP is trading well and rising against most others. This keeps the broad downtick in EURGBP intact, with the 200-dma of 0.8643 acting as first major support on any fresh selling pressure.
• US PPI data today will take a second look at the inflation picture in the US, albeit for October & November rather than yesterday's December CPI print (December PPI follows in the schedule on January 30th), which could contain any market reaction to an outside-of-expectations print today. That said, the PPI print today will provide further key inputs for PCE metrics - which could prove influential.
• Central bank speaker schedule is busy Wednesday, with appearances from Fed's Paulson, Miran, Kashkari, Bostic & Williams all due alongside BoE's Ramsden - who speaks on bank resolution regimes. 

Germany will hold its first triple-line long-dated auction this morning. On offer will be E1bln of each of the 3.25% Jul42 Bund, the 0% Aug-52 Bund and the 2.90% Aug-56 Bund. As well as being the first triple-line auction, this is the first that sees a 15/20-year Bund on offer alongside 30-year Bunds – a theme that will be the case for the additional line in all 15/20/30-year Bund auctions through 2026. As such, it will be a useful gauge of long-end Bund demand against a backdrop of more expansionary domestic fiscal policy.

• German yields are marginally higher across the curve today. 10-year yields at 2.85% remain comfortably within the 2.80-2.90% range that has contained price action since early December.
• The 5s30s curve has continued to grind steeper, albeit at a much weaker pace than in Q1 2025. 5s30s is currently at 105.5bps, with the primary topside target at the September high of 111bps.
• Bund futures are unchanged at 128.09. Futures are in consolidation mode and continue to trade closer to their recent highs. A S/T bull cycle is still in play. The latest rally does undermine the bear theme and attention is on resistance around the 50-day EMA, at 128.28.
• Alongside the German auction, Ireland and France are holding syndications today. Demand at the French sale will be interesting given ongoing domestic budget uncertainty.
• 10-year EGBs spreads to Bunds are within 0.5bps of yesterday’s closing levels.
• ECB’s Villeroy, Kazaks and de Guindos added little new to the policy debate in comments this morning. 

Figure 1: German 5s30s Since 2025