BONDS: EGBs-GILTS CASH CLOSE: Bull Flattening On US PPI And Tariff Rhetoric
Feb-13 18:06
European curves bull flattened Thursday as US inflation data and tariff threats continued to set the tone.
- Having already pared much of Wednesday's post-US CPI rise, helped this morning by further reciprocal tariff bluster from US President Trump and softer energy prices, Bund and Gilt yields pushed lower in the afternoon on US data.
- With the US PPI report signalling lower PCE price pressures than feared after the CPI data, global bonds rallied led by Treasuries.
- The UK curve continued to bull flatten after the data, with the move in Germany stalling out somewhat.
- On the day, German instruments outperformed UK counterparts across the respective curves, with the short-end outperformance particularly pronounced.
- The latter can be attributed to ECB 2025 implied cut pricing extending 4bp to just over 81bp amid lower European gas prices and the EU considered particularly vulnerable to Trump tariff threats, contrasted with the BOE equivalent relatively flat at 58bp.
- UK quarterly and monthly GDP data surprised to the upside, but it is unlikely to change the narrative for the BOE in the near-term.
- Periphery EGB spreads tightened, but French OATs stood out in the semi-core space with 10Y spreads falling 3bp vs Bund.
- Friday's scheduled data highlight is Eurozone prelim Q4 GDP, along with a variety of price measures.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is down 4.9bps at 2.088%, 5-Yr is down 6bps at 2.207%, 10-Yr is down 5.9bps at 2.418%, and 30-Yr is down 5.3bps at 2.672%.
- UK: The 2-Yr yield is down 1.8bps at 4.179%, 5-Yr is down 2.6bps at 4.196%, 10-Yr is down 5.3bps at 4.49%, and 30-Yr is down 5.9bps at 5.076%.
- Italian BTP spread down 1.2bps at 107.2bps / French OAT down 2.9bps at 73.5bps
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US: Americans Give Biden Negative Assessment On Economy And Foreign Policy
Jan-14 18:03
A new survey from Gallup found that Americans “offer a largely negative assessment” of the progress made during the administration of President Joe Biden on 18 economic, national and international issues.
- Semafor notes on the survey: “Majorities said they believe the US lost ground over the past four years in addressing the federal debt, immigration, the wealth gap, the economy, the US’ place in the world, and crime... Meanwhile, pluralities said they think the US has fallen behind in other areas like infrastructure, despite Biden presiding over the passage and implementation of a sweeping bipartisan infrastructure law.”
- Yesterday, Biden defended his legacy in his final foreign policy speech, arguing he oversaw the rehabilitation of US multilateralism and enacted policies that will bolster the US’ global standing in the future.
- Biden: “...thanks to our administration, the United States is winning the worldwide competition. Compared to four years ago, America is stronger, our alliances are stronger, our adversaries and competitors are weaker.”
- On China, Biden said: “Today, I can report to the American people we’re in a better strategic position for long-term competition with China than we were when I took office… According to the latest predictions, on China’s current course they will never surpass us.”
Figure 1: Progress Report in 18 Areas During President Biden’s Four Years In Office
Source: Gallup
PIPELINE: Corporate Issuance Update: $3.5B British Colombia 3Y SOFR Priced
Jan-14 17:58
- Date $MM Issuer (Priced *, Launch #)
- 01/14 $3.5B *British Colombia 3Y SOFR+45
- 01/14 $3B *KFW +5Y +40
- 01/14 $2.5B #BNG Bank 5Y SOFR+47
- 01/14 $2.5B *CADES 5Y SOFR+68, upsized from $2B
- 01/14 $2B *CAF 5Y SOFR+82
- 01/14 $2B *IFC 3Y SOFR+29
- 01/14 $500M #Hyundai 3Y +80
- 01/14 $Benchmark Blackstone Private Cr Fund 7Y +190a
- 01/14 $Benchmark Adobe 3Y +30, 5Y +40, 10Y +55
- 01/14 $Benchmark BFCM 5Y +95, 5Y SOFR+123
- 01/14 $Benchmark LifePoint Health 7NC3
OPTIONS: Large Sonia Call Spread Buying Tuesday
Jan-14 17:52
Tuesday's Europe rates/bond options flow included:
- RXG5 125.5p, bought for 1 in 2.2k
- RXH5 135/136cs bought for 4.5 in 7.5k
- ERM5 97.625/97.75/97.875c fly vs 97.4375/97.3125ps, bought the fly for 0.25 and half in 9k.
- SFIM5 95.75/96.00cs, bought for 6.75 in 24k.
- SFIM5 95.70/96.00cs, bought for 8.75 and 9 in 20.5k
- SFIZ5 96.35/97.00cs x3 vs 95.60p x1, bought the cs for -2 in 10k total.
- SFIZ5 95.90/96.05 call spread, bought for 6 in 15k
- 0NM5 96.00/96.20/96.30/96.40c condor, bought for 4.25 in 10k.
