REAL ESTATE: CPI Property: Tender Results

Gilt futures are struggling to recover from lows, with Bunds experiencing some light pressure after a firmer-than-expected round of ZEW expectations data. Contract last -22 at 91.59 vs. lows of 91.51, breaking yesterday’s low.

• Next support located at the April 15 low (91.43).
• Yields 1.5bp lower to 3.0bp higher, curve steeper.
• 2s anchored by the dovish takeaways from the wage metrics in the monthly labour market report.
• SONIA futures +2.0 to -2.5, strip twist steepens.
• BoE-dated OIS showing ~49bp of cuts through year-end vs. ~46bp late yesterday, next 25bp cut fully discounted through the September MPC (~21bp priced through August).
• Meanwhile a relatively heavy morning for EGB & EU-bond supply applies pressure further out the curve.
• 2s10s and 5s30s curves both stick within multi-week ranges, failing to retest April cycle highs.
• The DMO’s consolation with market participants yielded no major surprises, with the DMO noting that it is planning to schedule one syndicated offering during Q2 2025-26 for the sale of a new medium conventional gilt with the transaction planned to take place in September 2025.
• BoE chief economist & hawkish dissenter Pill doesn’t offer much in the way of fresh monetary policy-related comments (pointing to his appearance scheduled for next week when it comes to more meaningful comments on that front), while long end I/L supply passed smoothly.

The German ZEW expectations index rose from -14.0 to 25.2 in May, outperforming consensus of 11.3 but remaining below March's 3-year high of 51.6. The current conditions index meanwhile disappointed as it deteriorated slightly from -81.2 to -82.0 (consensus -77.0). 

• The improvement in expectations comes after global trade tensions eased following the 90-day US tariff pause announced by the US administration on Apr 9. The German DAX index has erased its losses seen initially after 'Liberation Day' on April 2 and traded at all-time highs yesterday.
• The survey of 191 analysts was conducted May 5-12.
• The ZEW index is based on a survey of "experts from banks, insurance companies and financial departments of selected corporations [which] have been interviewed about their assessments and forecasts for important international financial market data" - so the index can exhibit elevated levels of correlation with German stock indices as the DAX.