BONDS: EGBs-GILTS CASH CLOSE: Gilts Strengthen Pre-UK CPI
Apr-15 17:43
Gilts handily outperformed Bunds Tuesday.
- Softer-than-expected elements of the UK labour market report saw Gilts get off on the front foot across the curve.
- Gilts rallied into the close, potentially in anticipation of tomorrow's CPI data, unlike Bunds which were unmoved.
- On the day, the UK curve twist steepened with a notable rally at the short end, with Germany's bear steepening.
- Italy and Greece underperformed on the EGB periphery.
- Wednesday's data includes UK CPI - MNI's preview is here. And Thursday brings the ECB decision - preview here.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 0.7bps at 1.766%, 5-Yr is up 1.6bps at 2.09%, 10-Yr is up 2.2bps at 2.534%, and 30-Yr is up 3.8bps at 2.915%.
- UK: The 2-Yr yield is down 5.6bps at 3.962%, 5-Yr is down 4.3bps at 4.11%, 10-Yr is down 1.2bps at 4.648%, and 30-Yr is up 4.3bps at 5.427%.
- Italian BTP spread up 1.7bps at 118.2bps / Greek up 2.9bps at 92.4bps
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FED: March Economic Projections: Higher Inflation, Weaker Growth, Same Rates
Mar-14 21:28
The MNI Markets Team’s expectations for the updated Economic Projections in the March SEP are below.
- The unemployment rate is likely to rise slightly for 2025 alongside a downgrade in GDP growth, while the 2025 core and headline PCE inflation projections are set to rise again. Changes to later years will likely be limited, however.
- More detail on the shift in Fed funds rate medians is in our meeting preview - we will add more color next week.
FED: Market Pricing Nearly 3 2025 Cuts As Conditions Tighten
Mar-14 21:25
Amid rising government policy uncertainty, sentiment among businesses and consumers has fallen sharply since the start of the year, while equities and the dollar have reversed their post-election rise. Overall, financial conditions have tightened, even if stress is not yet mounting, e.g. no major widening of credit spreads (the accompanying chart shows the Fed’s financial conditions impulse index but only through January).
- Combined with growth fears, this has affected expectations for the Fed’s rate path, with around 18bp more cuts expected in 2025 compared with what was seen after the January FOMC. 65bp of cuts are priced for the year as a whole. 2025 cut pricing reached 71bp before the February inflation data and 76bp before the February payrolls report.
- A rate cut is seen with near zero probability for March’s meeting, but the first full cut is just about priced for June, with a second nearly priced by September.
- Chair Powell has no reason to endorse or refute these expectations – he’s likely to be happy with a press conference that ends with little discernable change in pricing.
CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
Mar-14 21:17
- CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
