BONDS: EGBs-GILTS CASH CLOSE: Week Ends On A Bear Flattening Note
Feb-14 17:17
European curves bear flattened Friday.
- An early rise in yields linked to prospects of a less-onerous-than-expected US reciprocal tariff regime (announced late Thursday) was sharply pared in early afternoon.
- US data once again drove the afternoon move as January US retail sales came in much weaker than expected.
- Bund and Gilt yields would fall to session lows around a half hour after that release, but edged slightly higher going into the weekend to finish near the middle of the session's range.
- ECB cut pricing was pared by around 4bp for 2025 as a whole (to 78bp), with BOE flat (57bp).
- After initially tightening, periphery EGB spreads widened steadily through the session.
- Core curves bear flattened slightly for the week as a whole, with Gilts outperforming: 10Y Gilt yields closed the week 2.4bp higher, with 2Y up 3.2bp; 10Y Bund yields were up 5.9bp, with 2Y up 6.5bp.
- Next week's calendar includes flash February PMIs and UK inflation and labour market data.
Closing Yields / 10-Yr EGB Spreads To Germany:
- Germany: The 2-Yr yield is up 2.5bps at 2.113%, 5-Yr is up 1.8bps at 2.225%, 10-Yr is up 1.3bps at 2.431%, and 30-Yr is up 0.4bps at 2.676%.
- UK: The 2-Yr yield is up 2.1bps at 4.2%, 5-Yr is up 1.5bps at 4.211%, 10-Yr is up 1bps at 4.5%, and 30-Yr is up 1bps at 5.086%.
- Italian BTP spread up 1.9bps at 109.1bps / Spanish bond spread up 1.6bps at 62.9bps
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US: Trump To Begin Presidency "In Delicate Position", NPR
Jan-15 17:17
A new survey from NPR/PBS News/Marist found that President-elect Donald Trump, "will begin his presidency in [a] delicate position,” noting that survey respondents “have high expectations that their personal financial situations will improve under Trump, but more think tariffs will hurt rather than help the economy.”
- NPR notes: “Trump has promised bold action, but, as the NPR poll shows, the politics may be tricky. Presidents often become vulnerable because of overreach. They tend to believe — falsely — that because they were elected, they have a mandate for everything on their agenda. Clearly, that's not the case.”
- Lee Miringoff at Marist notes: "The opening round of the second term is not going well with the public. Americans are not convinced of Trump's agenda pillars, including pardons and tariffs. Mass deportations are only getting mixed reviews."
Figure 1: Support for President-elect Trump's Policy Proposals
Source: NPR, Marist, PBS News
BOE: Taylor sees "small" risk that a downside risk to case 1 may be needed
Jan-15 17:12
One last point on Taylor here before the Q&A starts - he's also talking about potential evolutions of scenario analysis and noting that the cases looked at will change over time.
- He raises the possibility of a potential downside risk to case 1 - in which Bank Rate might need to be "below the neutral level for a time, as in past downturns".
- He notes that "The risk of this case may be small as of now, but the costs, both of undershooting the inflation target and of a recession, could be very high."
CANADA: 5Y Auction: More Typical Bid-to-Covers After Low B-C In 2s and 10s
Jan-15 17:10
- Canada has sold C$6bn of the 2.75% Mar’30 at an average yield of 3.229%.
- The bid-to-cover of 2.275 was close to the prior five-auction average of 2.23, after some low bid-to-cover results for 2s and 10s recently.
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