FRANCE: Gov't Revises Down Growth; Spox Says Tariffs Expected In 20-25% Range
Apr-02 10:51
Gov't spox Sophie Primas has said that the French administration is expecting "powerful" tariffs from US President Donald Trump, coming in the range of 20-25%. Primas' comments come as Minister Delegate for Labour and Employment Astrid Panosyan-Bouvet said on France 2 TV that instead of the 0.9% economic growth forecast in the budget just two months ago, “We are at more like 0.7%, which are the Bank of France forecasts, absolutely,”
- On 1 April, Finance Minister Eric Lombard, speaking to parliament, said regarding the looming impact of US tariffs, “We are indeed in a delicate economic situation, [...] We are being extremely careful to continue with measures of simplification and support for activity to confront these challenges.” He gave no indication of the exact details of any response.
- Further fiscal changes could put pressure on the minority gov't of PM Francois Bayrou. The 2025 budget, involving spending cuts and tax hikes, was already broadly unpopular with most of the main left-wing New Popular Front alliance and the far-right Rassemblement National (RN, National Rally).
- Further measures intended to bolster France's fiscal outlook and avoid market jitters could spark more political backlash. A snap parliamentary election cannot take place until July. The febrile political atmosphere in France following the conviction of RN figurehead Marine Le Pen and the ban on her running for the presidency in 2027 could add to the gov'ts headaches. The RN has sometimes abstained on votes, allowing the gov't to remain in place. There is no guarantee this situation is maintained.
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CROSS ASSET: Euribor Strip is sold in Good size
Mar-03 10:50
- Short end Euribor seems to be leading Bonds lower here, the strip is sold through the lows in very good size.
- Bund is sold in 7k, BTP 3k, OAT 1.5k and Gilt on the follow in over 1.5k.
- We have not seen any new trigger as such, Equities are extending higher, and Bund is testing immediate support at 132.24.
- Further out would see the 131.84 Gap.
DUTCH T-BILL AUCTION RESULTS: DTC Results
Mar-03 10:34
| Type | 4-month DTC | 6-month DTC |
| Maturity | Jun 27, 2025 | Aug 28, 2025 |
| Amount | E1.23bln | E1.05bln |
| Target | E1.0-1.5bln | E1.0-2.0bln |
| Previous | E1.44bln | E1.47bln |
| Avg yield | 2.315% | 2.275% |
| Previous | 2.432% | 2.320% |
| Bid-to-cover | 1.45x | 1.62x |
| Previous | 2.24x | 1.3x |
| Previous date | Feb 03, 2025 | Feb 03, 2025 |
Source: Bloomberg
GILTS: Recovery Rally Fades Alongside Wider Risk-On
Mar-03 10:34
Gilt futures -67 at 92.76, which is a fresh session low.
- The bullish short-term technical set up in the contract remains intact.
- Initial support at 92.72, followed by 92.22.
- Yields 5-6bp higher across the curve.
- Cross-market cues continue to dominate.
- Second-round pressure stemming from wider risk-on flow results in fresh session lows for gilts in recent trade.
- A reminder that reports pointing to more forceful short-term German fiscal spending drove an early sell off.
- That was before a recovery as markets assessed increased U.S.-Ukraine tensions, which presents greater inflationary risk but widens the left tail of the economic growth outlook.
- Final UK manufacturing PMI was slightly higher than flash but still comfortably sub-50.
- GBP STIRs follow the long end.
- 52bp of BoE cuts priced through year-end vs. ~56.5bp late Friday.
- ~18bp priced through May, ~23.5bp through June and ~36.5bp through August, we still look for a cut in May at this stage.
- SONIA futures flat to -7.5.
- Final services PMI data (Wednesday) and the BoE DMP survey (Thursday) headline this week’s UK data calendar.
- This week’s BoE-speak will come from Bailey, Pill, Mann, Greene & Taylor.
- Expect more detail on those events in our Gilt Week Ahead publication.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Mar-25 | 4.458 | +0.3 |
May-25 | 4.275 | -18.0 |
Jun-25 | 4.223 | -23.2 |
Aug-25 | 4.092 | -36.2 |
Sep-25 | 4.049 | -40.6 |
Nov-25 | 3.960 | -49.5 |
Dec-25 | 3.934 | -52.0 |
