EGBS: German Curve Bear Flattens Ahead of ECB Decision
The German curve has bear flattened, with Schatz yields up 4.5bps to 1.79% and 30-year Bund yields up 1bp to 2.92%. Hawkish repricing in front-end EUR rates ahead of this afternoon’s ECB decision has driven the weakness in Schatz, which likely represents pre-decision positioning rather than a reassessment of Eurozone fundamentals. Meaningful headline flow has been relatively light.
- A 25bp cut is firmly expected from the ECB at 1315BST/1415CET, with more focus on whether wording tweaks will be made in the policy statement, and President Lagarde's description of balance of the balance of risks to inflation and growth in light of the German fiscal announcement and US reciprocal tariffs.
- Bund futures are -24 ticks at 131.02, with morning volumes relatively subdued. Initial support is 130.75 (Apr 15 low), which shields the 20-day EMA at 129.97. Resistance is seen at 131.57 (Apr 15 high).
- Today’s MT OAT auction was decent, with the top of the E10-12bln range sold and healthy bid-to-covers across lines. IL OAT supply is due at 1050BST.
- 10-year EGB spreads to Bunds are within 1bp of yesterday’s close, with European equity futures retracing late-Wednesday weakness overnight.
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FOREX: FX OPTION EXPIRY
Of note:
USDJPY 1.47bn at 150.00.
AUDUSD 1.62bn at 0.6320/0.6330.
EURUSD 1.34bn at 1.0900 (wed).
EURUSD 1.23bn at 1.0900 (fri).
USDJPY 1.19bn at 150.00 (fri).
USDCAD 2.99bn at 1.4280/1.4300 (fri).
EURUSD 1bn at 1.0925 (mon).
- EURUSD: 1.0900 (603mln), 1.0910 (311mln), 1.0915 (291mln).
- USDJPY: 149.00 (999mln), 149.75 (475mln), 150.00 (1.47bn).
- EURGBP: 0.8400 (300mln), 0.8425 (458mln).
- USDCAD: 1.4270 (399mln).
- AUDUSD: 0.6320 (922mln), 0.6330 (697mln), 0.6350 (213mln), 0.6430 (369mln).
- USDCNY: 7.2200 (400mln).
ECB: Rehn Sticks To March Guidance Script In MNI Event Opening Remarks
Initial highlights from Rehn. Not much to deviate from the ECB’s March guidance at first glance. More insight will likely be provided in the Q&A: “We are not pre-committed to any interest rate path. Policy rates are set at each meeting based on the latest information and our comprehensive assessment, next time on 17 April. The Governing Council retains full freedom of action in times of pervasive uncertainty”.
- “Tariffs and the related uncertainty will hit investment and slow down growth everywhere. The latest indicators on the US economy point to weaker than expected growth, which would also affect growth prospects in Europe”.
- “The growth outlook for the euro area remains subdued” …“In addition to cyclical factors, the euro area economy is also experiencing structural problems. In the ECB’s new forecast, productivity growth is slower than before. The weakness appears to be more structural than previously. But it would be wrong to say that it is entirely structural”.
- “Although there is little to be positive about in the security situation in Europe, the expected increases in defence spending and investment are at least likely to support GDP growth over the medium-term”.
- “Inflation in the euro area is stabilising at the ECB's 2% target”…“ Risks to the inflation outlook are two-sided”
EQUITIES: Roll Pace Update
Equity Roll Pace: March is still front Month but not by much, all the volumes in Futures are all spread related, June could become front as early as Tomorrow.
- ESA: 61%.
- NQA; 51%.
- DOW: 66%.
- VGA: 37% (as of Yesterday for the EU).
- DAX: 28%.
- FTSE: 44%.
