BUNDS: Intraday Sensitivity To Trade/Fiscal Headlines Remains Apparent
US President Trump's latest tariff threats against the EU alongside immediate pushback from the German Green Party on incoming Chancellor Merz's infrastructure fund concession proposals was worth a ~20 ticks rise in Bund futures, with European equity futures also targeting retest of earlier session lows (5313.00).
- While outright moves remain contained for now, markets remain sensitive to trade- and fiscal-related headline flow. How these two themes settle in the medium-term (if at all) will be key to ECB policy in Q2 and beyond.
- Latest headline from the US, echoing Trump's threats: "*LUTNICK: EU RESPONSE TO US WAS DISRESPECTFUL" bbg
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JPY: Higher Core Yields Continuing to Weigh on Japanese Yen
- Pressure on core fixed income and the associated higher yields on Tuesday are supporting the latest recovery for Cross/JPY, as USDJPY rises to a fresh session high of 152.38. Price action narrows the gap to Monday’s peak, which comes in at 152.54.
- Plenty of room for USDJPY to correct further to the topside, given the powerful move lower last week and additional profit taking dynamics potentially in play ahead of tomorrow’s US CPI release. Above Monday’s high, 152.89 (Jan 6 high) and 153.72 (Jan 27 low) are levels to watch.
- In similar vein, EURJPY is trading on the front foot following last week’s near 3% plunge. We have noted that the short-term trend is oversold, and today’s gains are allowing this condition to unwind.Initial resistances are located at 157.97 (Feb 3 low) and 158.86 (Feb 6 high), however firm resistance is not seen until the 20-day EMA and the significant pivot level of 160.00.
NATO: Anti-Gov't Strikes Could Impact NATO Defence Ministers' Meeting
Belgium's three major trade unions will hold nationwide strikes on 12 and 13 February in protest of the new 'Arizona' coalition's governing agreement. The strikes, which are set to affect public transport, postal services, refuse collection, and eductation are also set to result in no flights being able to depart Belgium's two busiest airports on 13 Feb. This strike could have knock-on effects for talks regarding European security.
- Previous strikes in Jan came on the back of leaked information speculating on cuts to welfare and pension reforms from the five-party 'Arizona' coalition that was in the final stages of agreeing on a plan for gov't. Having now come to power and outlined its plans, Günther Blauwens, president of the Flemish railway union ACOD Spoor, told Brussels Times that "There is even more anger now; many feel cheated."
- Defence ministers from Ukraine's allies meet in the Ukraine Defense Contact Group format (also known as the Ramstein format) tomorrow (12 Feb) at NATO's HQ in Brussels. The talks are the first in the format since US President Donald Trump took office, and for the first time will not be chaired by the US but instead by the UK. After this on Thursday 13 Feb, a NATO defence ministers' meeting takes place. A significant number of these defence ministers are planning to attend the 14-16 Feb Munich Security Conference in Bavaria. It remains to be seen whether ministers will commit to attending in person if they risk missing events later in the week.
GILT SYNDICATION: New 10-year: 4.50% Mar-35 gilt: Priced
- Reoffer: 99.706 to yield 4.5363%
- Size: GBP13bln (higher than the GBP8.5-10.0bln we expected)
- Orderbooks in excess of GBP140bln (inc JLM interest of GBP12bln)
- Spread set at 4.25% Jul-34 gilt + 5.5bp (guidance was + 5.5/6.0bps)
- HR 106% vs 4.25% Jul-34 gilt. Spot ref 98.23
- Maturity: 7 March 2035
- ISIN: GB00BT7J0027
- Settlement: 12 February, 2025 (T+1)
- Bookrunners: Barclays, BNP Paribas, Citi (B&D/DM), Goldman Sachs International Bank, HSBC and NatWest.
- Timing: TOE: 11:56GMT. FTT immediately
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