US TSYS: Off Highs But Holding Bull Flattening With PCE Eyed
Mar-28 10:54
- Treasuries trade bull flatter, with the front-end awaiting data steers but the long end extending gains after yesterday’s lows provided enticing levels.
- Treasuries underperform EGBs as US equity futures continue to prove more resilient than their European counterparts following Wednesday's auto tariffs announcement.
- Today’s session is centered around the February PCE report, with core PCE expected to print a robust pace and consumption strength assessed, along with sensitivity to any pre-weekend tariff comments ahead of the approaching Apr 2 reciprocal announcement.
- Cash yields are 0.4bp to 3.9bp lower, with largest declines in 30s.
- 2s10s at 34.6bp (-2.3bp) has pulled away from yesterday’s high of 38.4bp that marked its steepest since mid-January.
- TYM5 trades at 110-20+ (+07) on average cumulative volumes of 315, having eased off an earlier high of 110-24.
- It has lifted off yesterday’s low of 110-06 which probed support at 110-07 (50-day EMA), with any further downside watched with key support at 110-00 (Feb 7 high). Resistance meanwhile is seen at 110-26 (Mar 25 high) before 111-17+ (Mar 20 high).
- Data: PCE Feb (0830ET), U.Mich consumer survey Mar final (1000ET), KC Fed services Mar (1100ET)
- Fedspeak: Barr (1215ET), Bostic (1545ET) – see STIR bullet
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GILTS: Off Highs After Futures Pierce Initial Resistance
Feb-26 10:38
Gilts are off highs after rallying alongside wider core global FI markets during the European morning.
- The uptick gained momentum as gilt and Bund futures broke through their respective Tuesday highs, although there was no clear headline catalyst driving the rally.
- M5 futures pierced initial resistance at the Feb 13 high (93.39), with the contract topping out at 93.51 before fading back to 93.35.
- Fresh extension higher would target the Feb 6 high & bull trigger (93.83). A break there would reignite bullish momentum.
- Yields 1.5-3.0bp lower, curve flatter.
- The 10-Year UK/German yield spread is close to its ’25 closing low (203.8bp), with a post-election increase in odds of near-term German fiscal support driving spread tightening week-to-date.
- GBP STIR pricing little changed on the day, with 57bp of cuts showing through year-end.
- ~20bp of cuts priced through May, with the next full 25bp move discounted through the end of the June MPC.
- Little of note on the UK data calendar today,
- BoE dove Dhingra will speak on “Trade fragmentation and monetary policy” from 16:30 GMT, don’t expect a change in tone after she reaffirmed her dovish stance earlier in the week (pushing back against the idea of gradual cuts given her view on consumption).
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Mar-25 | 4.447 | -0.8 |
May-25 | 4.254 | -20.0 |
Jun-25 | 4.187 | -26.8 |
Aug-25 | 4.046 | -40.9 |
Sep-25 | 3.993 | -46.1 |
Nov-25 | 3.910 | -54.5 |
Dec-25 | 3.882 | -57.3 |
EGBS: Bund Futures Strengthen Alongside European Equities; Spreads Tighten
Feb-26 10:38
Major EGB futures have strengthened this morning with no obvious catalyst. A renewed fall in natural gas futures (-4% today) will have helped limit retracements over the last 90 minutes, even in the presence of modest 15-year Bund supply.
- Bund futures are +24 ticks at 132.72, through the Feb 21 high of 132.60. Recent gains still appear corrective for now, but clearance of key near-term resistance at 132.97 (Feb 13 high) would signal a reversal. Support is seen at the Feb 19 low (131.96).
- The German curve has bull flattened, with 30-year yields down 2.5bps.
- Today ‘s 15-year Bund auction passed smoothly.
- European equity futures are also higher, facilitating a tightening of 10-year EGB spreads to Bunds. The BTP/Bund spread is 1bp narrower at 111.5bps, after mechanically widening on the back of a BBG benchmark BTP roll earlier this week.
- Regional focus remains on tomorrow’s data calendar. Which includes Spanish flash February inflation.
GERMAN AUCTION RESULTS: 15-Year Bunds
Feb-26 10:34
| 0% May-36 Bund | 1.00% May-38 Bund | |
| ISIN | DE0001102549 | DE0001102598 |
| Total sold | E500mln | E1.5bln |
| Allotted | E401mln | E1.253bln |
| Previous | E0.408bln | E0.438bln |
| Avg yield | 2.51% | 2.60% |
| Previous | 2.34% | 2.42% |
| Bid-to-offer | 2.15x | 2.36x |
| Previous | 3.98x | 4.81x |
| Bid-to-cover | 2.68x | 2.83x |
| Previous | 4.87x | 5.49x |
| Avg price | 75.75 | 82.29 |
| Low price | 75.73 | 82.27 |
| Pre-auction mid | 75.702 | 82.235 |
| Prev avg price | 76.46 | 83.57 |
| Prev low price | 76.46 | 83.57 |
| Prev mid-price | 76.386 | 83.529 |
| Previous date | 09-Oct-24 | 04-Sep-24 |
