ECB: Lagarde: Won't Act Without Sufficient Data

Gilts initially rally at the open, but the move away from Asia-Pac highs in Tsys & Bunds provides some counter.

• Feedthrough from the U.S. tariff situation continues to dominate, with U.S. & European equity futures lower.
• Gilt futures +2 at 92.48 vs. highs of 92.61.
• Friday’s high has been pierced, next resistance of note located at the Jan 14 high/key resistance (92.95). The bull cycle in the contract remains intact. Bears need to force a move back below the 20-day EMA (91.58) to start countering the theme.
• A reminder that the March contract goes first notice on Thursday, with roll activity accounting for over 60% of activity in that contract through early trade today.
• Yields little changed to 1bp lower, curve flatter.
• BoE’s Taylor will take part in a fireside chat at Deutsche Bank this morning (11:00 London). It is well known his views are on the dovish side and he has also referenced 3% as his neutral estimate, most recently in the February Minutes, so this is unlikely to be market moving.
• GBP STIRs little changed vs. pre-gilt open levels, showing ~49bp of easing through year-end.
• This afternoon will see the BoE sell GBP800mln of short bucket maturity gilts from its APF holdings. 

Over 60% of the front Month Volume in Tnotes and Gilt are spread related, First Notice for Gilt is the 26th and 27th for US Treasuries. Expect for these to be fully active at the start of the Week.

PACE:

• WNA: 22% (below pace).
• USA: 21% (below pace).
• UXY: 22% (below pace).
• TYA: 25% (below pace).
• FVA: 32% (above pace).
• TUA: 30% (above pace).
• Gilt: 24% (as of Thursday).

• Fairly contained reaction in EUR STIRs to the latest bout of US tariff uncertainty. ECB-dated OIS continue to price 8bps of easing through year-end. The 15% tariffs imposed under Section 122 leaves the EU facing unchanged tariff rates relative to IEEPA.
• On Sunday, Chairman of the EU Parliament’s trade committee, Bernd Lange, said he will propose suspending approval work on the US trade deal – a reminder that the process was frozen in January amid Greenland tensions. ECB President Lagarde said that these new US tariff moves risk upsetting the EU/US’s negotiated “equilibrium”.
• Speculation around Lagarde’s possible early exit from the bank remains a talking point. Bloomberg sources said that “a number of Governing Council members are perplexed by the lack of pushback to the speculation” – we had noted last week that Lagarde’s comments to the WSJ on the reports certainly kept her options open.
• After the February PMIs were more resilient than expected last Friday, this week’s focus will be on the final January inflation print (Wednesday) and flash February inflation data from France, Spain and Germany on Friday.