EGBS: Commodity Pullback Provides Light Support To Major Futures
Feb-13 10:24
Bund futures have traded in a tight 21 tick range this morning, lightly supported by a pullback in crude oil and natural gas futures following yesterday’s Trump/Putin call and developments between Israel/Hamas.
- Bunds are +24 ticks at 132.39, still well below Monday’s high of 133.61. Key resistance and the bull trigger has been defined at 133.71, the Feb 5 high. A break of it would resume the recent bull cycle.
- Eurozone December industrial production was in-line with MNI’s tracking estimate at -1.1% M/M, though it was significantly below consensus of -0.6%. The data wasn’t a market mover.
- EGB curves have lightly bull flattened, with the presence of today’s 3/7-year BTP supply helping to keep short-end yields underpinned.
- The Italian auction was digested smoothly, with bid-to-covers broadly in line with recent norms.
- 10-year EGB spreads are 1-2bps tighter, with European equities up 1% on the prospect of Ukraine peace talks.
- Focus turns to US PPI, with markets also watchful of reciprocal tariff announcements from US President Trump.
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US INFLATION: MNI US CPI Preview: Still Too High For Comfort
Jan-14 10:15
Our preview of Wednesday's December CPI release has been published (PDF):
- Consensus sees core CPI inflation decelerating slightly to between 0.2 to 0.3% M/M in December, with MNI’s analyst review pointing to an average estimate of 0.24% so a bias toward a 0.2% rounded figure.
- Likely to be the single most closely watched individual aspect of Wednesday’s CPI report, rental inflation is expected to accelerate to an average figure that firmly rounds to 0.3% M/M in December.
- Supercore inflation is seen pulling back, though, to the upper 0.20s%, from 0.34% in November.
- If housing is our top pick to watch this month then core goods inflation – which is seen pulling back in December - is closely second, amid tariffs speculation.
- Initial estimates point to core PCE inflation at ~0.20% M/M, softer in outright terms but on a relative basis an acceleration from the softer 0.115% in Nov. That outlook will hinge partly on PPI data out Tuesday.
- It is clear that the Fed will hold in January, with the first plausibly “live” meeting not until March. But with pricing having shifted so quickly away from 2025 cuts, it’s a good juncture to assess whether markets have gotten too hawkish.
- Even in-line inflation readings could bolster the FOMC leadership’s confidence that they are on track to get PCE to 2%, and leave the door open to two rate cuts later this year, though this report is not widely expected to provide the requisite evidence.
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