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The 10-Year gilt/Bund spread has rebounded from the lows seen in March, last ~195bp.

• The early March narrowing was mostly driven by the tabling of the expedited German fiscal loosening plan, which has since been delivered.
• The lack of an immediate increase in German issuance has factored into the move away from the March lows.
• More recently, gilts initially benefitted from the DMO’s remit for 25/26 being skewed slightly shorter-than-expected in maturity terms.
• The fact that the size of the remit was within the lower end of expectations, presented further cross-market support.
• 2 factors have played into the spread widening seen since that event, in our view:
• 1) Perceptions surrounding European economic growth being more susceptible to downside shocks from U.S. tariffs than the UK’s growth (as well as the UK seemingly being in a better position to cut a trade understanding with the U.S. when compared to the EU).
• 2) Continued questions surrounding the fiscal health of the UK and the potential for an upsizing of issuance over the medium term, given continued headwinds for growth and still limited fiscal headroom.
• The interplay between the factors outlined above will be key for the direction of the spread in the medium-term, with last week’s move back above 200bp faded in the first instance.

Fig. 1: 10-Year Gilt/Bund Spread (bp)

Source: MNI - Market News/Bloomberg

• RES 4: 1.4700 Round number resistance
• RES 3: 1.4641 76.4% retracement of the Feb 3 - 14 bear leg
• RES 2: 1.4452/4543 High Mar 13 / 4 and a bull trigger
• RES 1: 1.4415 Intraday high  
• PRICE: 1.4403 @ 14:49 BST Apr 1
• SUP 1: 1.4320/1.4235 50-day EMA / Low Mar 26 and a key support   
• SUP 2: 1.4151 Low Feb 14 
• SUP 3: 1.4107 50.0% retracement of Sep 25 ‘24 - Feb 3 bull run
• SUP 4: 1.4011 Low Dec 5 ‘24

USDCAD is trading higher today. A bullish theme remains intact - moving average studies continue to highlight a dominant uptrend - and a stronger rally would refocus attention on the bull trigger at 1.4543, the Mar 4 high. A return lower and clearance of 1.4235, the Mar 26 low, would instead undermine the bull theme and highlight potential for a test of 1.4151, the Feb 14 low and a bear trigger.

• MNI: US MAR FINAL MANUF PMI 50.2 (FLASH: 49.8); FEB 52.7