BONDS: EGBs-GILTS CASH CLOSE: Bunds Rally Amid Auto Tariff Concerns
Mar-27 18:24
European curves steepened Thursday, with Bunds easily outperforming Gilts.
- The overnight announcement of the US's imposition of 25% tariffs on auto imports saw Bunds rally on the open, and while they would fluctuate through the session they held onto those gains.
- Conversely, Gilts weakened through most of the morning session, as equities regained ground, and the UK seen as relatively less economically vulnerable to the auto tariffs.
- Norges Bank held rates (a slight chance of a cut had been priced), while in data, Eurozone lending and M3 money supply growth picked up.
- Both Bunds and Gilts gained on weaker-leaning US data out in early afternoon. Both the UK and German curves twist steepened, with short-end yields lower. Periphery EGB / semi-core spreads were mixed but little changed overall.
- Friday's data includes UK retail sales and GDP, with the first country-level data of March's flash Eurozone inflation round (France and Spain) - MNI's preview is here - and ECB CPI expectations, plus appearances by Nagel and Muller.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is down 5bps at 2.069%, 5-Yr is down 4.1bps at 2.373%, 10-Yr is down 2.2bps at 2.773%, and 30-Yr is down 0.3bps at 3.134%.
- UK: The 2-Yr yield is down 1.7bps at 4.273%, 5-Yr is up 2.2bps at 4.392%, 10-Yr is up 5.5bps at 4.783%, and 30-Yr is up 5.9bps at 5.368%.
- Italian BTP spread up 0.4bps at 110.6bps / Spanish down 0.2bps at 62.3bps
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US: FED Reverse Repo Operation
Feb-25 18:21
RRP usage rebounds to an even $96.0B this afternoon from $76.818B on Monday. Compares to Friday, February 14 low of $58.770B - the lowest level since mid-April 2021. The number of counterparties at 36 from 30 prior.
STIR: BLOCK: Large Downside Skew Play via
Feb-25 18:17
- Skew play blocked at 1258:27ET:
- +38,000 TYK5 108.5 puts, 21 vs.
- -15,000 TYK5 112 calls, 34 and
- -10,000 TYJ5 112 calls 15 vs
- 24,000 TYH5 110-16
- Meanwhile, a large May 10Y risk reversal traded on screen shortly after:
- -30,000 TYK5 109/111 put over combos at 13 vs. 110-07/0.71%
US TSYS/SUPPLY: Review 5Y Auction - Forth Consecutive Stop
Feb-25 18:07
- Tsy futures remain well bid (TYH5 trades 110-16 last, +20) after $70B 5Y note auction (91282CMQ1) stops 0.9bp through (fourth consecutive stop since June): drawing 4.123% high yield vs. 4.134% WI; 2.42x bid-to-cover vs. 2.40x prior.
- Peripheral stats show indirect take-up rising to 73.87% vs. 62.79% prior, directs recede to 14.54% vs. 26.09% prior (highest since Jul 2014), primary dealer take-up 10.59% vs. 11.12% prior.
- The next 5Y auction is tentatively scheduled for March 26.
