EU CREDIT SUPPLY: Continental Mandate

 A 25bp ECB cut on Thursday remains over 90% implied in ECB-dated OIS, with implied rates through the remainder of this year little changed from Friday’s close. There are 78bps of cuts priced through December, consistent with 3x25bp cuts in total. 

• Euribor futures are -2.0 to +0.5 ticks through the blues, twist flattening slightly. Z5 is -1.5 ticks at 98.230. Resistance is seen at 98.335 (Apr 7 and Apr 9 high), with support at 98.170 (Dec 20 high and Apr 11 low).
• US President Trump’s reciprocal tariff declaration on April 2 drove a notable dovish repricing in near-term EUR rates, with the initial announcement featuring more stringent tariffs than many had been assuming. Although the President has since delayed those reciprocal tariffs for 90-days (including temporary reprieve for some consumer electronics goods as of Friday), uncertainty remains extremely high and levies on autos, steel and aluminium remain in place.
• Taken alongside the softer-than-expected March core inflation print and weaker-than-expected March services PMI data, there appear few obstacles to brining the deposit rate to the top of the 1.75-2.25% neutral rate band. The MNI Policy Team’s recent sources piece supported such an outcome.
• Our full ECB preview will be released later this week.

Swedish money market participant 5-year ahead CPIF inflation expectations were steady at 2.3% in April. While this series has moved away from the 2% target in recent months, in line with an acceleration in spot inflation pressures, the Riksbank will be relieved that the April survey did not report a renewed uptick. 

• In an interview with MNI earlier this month, Riksbank Deputy Governor Jansson said that rising trade tariffs are likely to depress economic growth, but while their effects on inflation may be short-lived monetary policymakers must be alert to any risk of price expectations becoming de-anchored.
• Jansson noted that while in theory the Riksbank would be able to look through elevated inflation if expectations remain stable in the near-term, Jansson highlighted the difficulties in practice of doing so and made the case for acting decisively if need be.
• One-year ahead expectations were also unchanged at 2.2%, while 2-year ahead expectations ticked up to 2.3% (vs 2.1% prior).
• 1-year ahead GDP growth expectations were revised sharply lower (1.6% vs 2.4% prior), likely reflecting US President Trumps reciprocal tariff announcements. 2-year ahead GDP growth expectations were 2.0% (vs 2.4% prior), and 5-year ahead expectations were 2.0% (vs 2.1% prior).
• As such, money market participants now expect a deeper Riksbank easing cycle over the next 24 months.
• The survey was conducted Apr 7-Apr 11.

• RES 4: $34.903 - High Oct 23 ‘24 and the bull trigger 
• RES 3: $34.590 - High Mar 28 
• RES 2: $33.117 - 76.4% retracement of the Mar 28 - Apr 7 bear leg  
• RES 1: $32.313 - High Appr 7                                      
• PRICE: $32.064 @ 08:04 BST Apr 14
• SUP 1: $30.57728.351 - Low Apr 10 / 7 and the bear trigger                
• SUP 2: $27.686 - Low Sep 6 ‘24 
• SUP 3: $27.180 - Low Aug 14 ‘24   
• SUP 4: $26.451 - Low Aug 8 ‘24 and a key support   

Silver is holding on to last week’s gains. For now, the recent move higher appears corrective. The metal on Apr 7, traded through support at $28.748, the Dec 19 low. A clear break of this level would signal scope for a continued sell-off, towards $27.686, the Sep 6 ‘24 low. On the upside, resistance to watch is $32.208 the 50-day EMA. It has been pierced, a clear break of it would alter the picture and highlight a stronger reversal.