BONDS: EGBs-GILTS CASH CLOSE: Gilts Outperform As Trade Headlines Stay Dominant

Gilt yields resolved lower after volatile trading around the UK government's highly-anticipated fiscal statement, outperforming Bunds in a bull flattening move.

• Core instruments strengthened in early trade, with Gilts benefiting from a softer-than-expected inflation report.
• Gilt yields jumped to session highs on the Spring Statement release, but rebounded sharply after the release of the Gilt Remit showed a slightly lower than expected total (GBP299.2B vs. median GBP303B). The UK curve would close bull flatter.
• Core FI rallied through the cash close, as the White House confirmed President Trump would announce auto tariffs later in the day.
• ECB commentary was mixed but not unexpected given the sources:  dove Centeno said he saw no reason not to cut in April; hawk Holzmann conversely said he wouldn't vote to cut rates in April.
• The German curve bull steepened; periphery EGB spreads closed slightly wider of Bunds following a late risk-off move.
• Thursday's calendar is lighter, with appearances by BoE's Dhingra and multiple ECB officials, Spanish retail sales and ECB monetary aggregates data, and the Norges Bank decision bearing attention. 

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is down 1.8bps at 2.119%, 5-Yr is down 1.3bps at 2.414%, 10-Yr is down 0.3bps at 2.795%, and 30-Yr is up 0.6bps at 3.137%.
• UK: The 2-Yr yield is down 1.1bps at 4.29%, 5-Yr is down 1.6bps at 4.37%, 10-Yr is down 2.5bps at 4.728%, and 30-Yr is down 6bps at 5.309%.
• Italian BTP spread up 0.6bps at 110.2bps / Spanish up 0.2bps at 62.5bps

• RES 4: 1.1083 High Oct 2 2024  
• RES 3: 1.1040 High Oct 4 2024
• RES 2: 1.0961 76.4% retracement of the Sep 25 ‘24 - Feb 3 bear leg
• RES 1: 1.0955 High Mar 18  
• PRICE: 1.0787 @ 16:37 GMT Mar 26
• SUP 1: 1.0763 20-day EMA   
• SUP 2: 1.0631 50-day EMA and a short-term pivot level      
• SUP 3: 1.0471 Low Mar 4     
• SUP 4: 1.0360 Low Feb 28 and a key support  

EURUSD extends the pullback from its recent high. The move down is considered corrective and the trend condition is unchanged - it remains bullish. Note that moving average studies are in a bull-mode position, highlighting a dominant uptrend. Sights are on 1.0961 next, a Fibonacci retracement. Clearance of this level would open 1.1040, the Oct 4 ‘24 high. First support to watch is 1.0763, the 20-day EMA.

• European FI futures have hit session highs after a double hit from first White House’s Leavitt saying Trump will announce auto tariffs at 4pm ET today and then the FT reporting EU’s Sefcovic expecting broad Trump tariffs of about 20%.
• They have however be helped a touch lower after a separate WSJ report saying the US is weighing excluding auto parts from tariffs.
• Euribor futures now trade 5 ticks higher on the day through 2026 contracts, pushing the implied terminal yield 4bp lower to 2.01% for its lowest since the Mar 4 when European defense and infra spending packages were announced.
• This terminal yield is seen landing in the ERZ5 which tallies with ESTR ECB-dated OIS showing 54bp of cuts for 2025, leaving the depo rate a little under 2.0% and an effective rate at 1.88% (neutral estimated between 1.75-2.25%).
• Bund futures meanwhile touched 128.46 but have since eased to 128.38 (+.25) as they begin to more seriously eye resistance at 128.72 (20-day EMA).