EM CEEMEA CREDIT: LUMIIT: Outlook revised up to stable by S&P

There was little net reaction in EUR rates to the small upward surprise in French flash April HICP (0.8% Y/Y vs 0.7% cons, 0.9% prior). Although the French data follows a higher-than-expected Spanish print yesterday, we wrote in our preview that the bar to major market reactions to the April inflation figures was quite high, given ECB Governing Council focus on the negative growth implications of higher trade barriers.

• Euribor futures are -0.5 to +4.0 ticks through the blues, extening higher alongside Bunds with the blues outperforming.
• A 25bp cut in June remains essentially fully priced, with 13bps of sequential easing priced through July. 63bps of cuts remain priced through year-end.
• A reminder that July implied cut pricing was tempered a little yesterday afternoon, after the dovish Bank of Greece Governor Stournaras expressed caution around the idea of rates below 2%.
• German labour market (0855BST), state-level April flash inflation (0900BST) and flash Q1 GDP data (0900BST) are due shortly, alongside flash Q1 Italian GDP (0900BST). Earlier this morning, French GDP was in line with consensus at 0.1% Q/Q, albeit with weak compositional details.

• Bund is testing that small initial level at 131.63, but not too clear on this latest bid, the only headline that China wasn't in talks with the US may be providing some safer haven flow, but looking at Volumes these are still subdued, not seen any notable clip size into the gains.
• The German supply is also not expected to really weigh, but worth a note that, Month End extension in Europe for MS are decent, could expect some bid later in the Day around the unofficial EU close.
• Nonetheless, further upside traction in Bund would eye the 132.03 level.

Gilts rally at the open and extend higher in recent trade, taking cures from global peers since yesterday’s close.

• Futures through yesterday’s high, with our technical analyst’s next level of upside interest located at 94.00.
• Contract tops out at 93.62 for now.
• Yields 2-4bp lower, curve flattens.
• 2s10s and 5s30s continue to hold above 60bp & 120bp, respectively.
• 10s trade through the 4.460% level we have identified in recent days, with the next downside level of note coming in at the trendline support drawn off the Dec 8 ’21 lows (4.411%).
• Little of note on the UK data calendar today.
• Meanwhile, BoE MPC member Lombardelli will appear at 16:30, although scope for meaningful monetary policy limits may be limited by the nature of her appearance, as she launches the Bank’s new economics teacher training partnership with Manchester University.
• As such, expect macro cues (tariff headlines, European national level inflation data and U.S. economic data) to set the tone for most of the day.
• The exception being setup for and reaction to this morning’s GBP4.5bn auction of the 4.375% Mar-28 gilt.