EGBS: Shallow Pullback In Bund Futures On Equity Rally and Supply
Pullbacks in Bund futures have been shallow, with tariff-related uncertainty and expectations for an ECB cut on Thursday somewhat offsetting pressure applied by this morning's European equity rally and sovereign supply calendar.
- Futures are +22 ticks at 131.26, down from session highs of 131.57. The bull trigger is defined at 132.03 (Apr 7 high), with the 20-day EMA at 129.73 continuing to provide support.
- German cash yields are within 1bp of yesterday’s closing levels, the curve lightly twist flattens.
- Germany will look to sell E4.5bln of the 2.40% Apr-30 Bobl at 1030BST. Finland also comes to the market this morning.
- The ECB’s Q1 BLS shouldn’t change expectations for a 25bp cut on Thursday, but may contribute to wording tweaks in the policy statement, with the results consistent with “meaningfully less restrictive” policy.
- EGB spreads to Bunds little changed to 3.0bp wider on the day. OATs outperform Bunds at the margin (0.5bp tighter), with little of note when it comes to French news flow. We don’t see a meaningful headline driver for the widening in GGBs (~3.0bp vs. Bunds to 88bps).
- This morning’s other data weren’t material market movers: The German April ZEW survey saw a much weaker than forecast expectations component (-14.0 vs 10.0 cons, 51.6 prior), owing to tariff uncertainty and a DAX pullback. February Eurozone IP was stronger-than-expected at 1.1% M/M (vs 0.3% cons, 0.6% prior).
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
FED: March Economic Projections: Higher Inflation, Weaker Growth, Same Rates
The MNI Markets Team’s expectations for the updated Economic Projections in the March SEP are below.
- The unemployment rate is likely to rise slightly for 2025 alongside a downgrade in GDP growth, while the 2025 core and headline PCE inflation projections are set to rise again. Changes to later years will likely be limited, however.
- More detail on the shift in Fed funds rate medians is in our meeting preview - we will add more color next week.
FED: Market Pricing Nearly 3 2025 Cuts As Conditions Tighten
Amid rising government policy uncertainty, sentiment among businesses and consumers has fallen sharply since the start of the year, while equities and the dollar have reversed their post-election rise. Overall, financial conditions have tightened, even if stress is not yet mounting, e.g. no major widening of credit spreads (the accompanying chart shows the Fed’s financial conditions impulse index but only through January).
- Combined with growth fears, this has affected expectations for the Fed’s rate path, with around 18bp more cuts expected in 2025 compared with what was seen after the January FOMC. 65bp of cuts are priced for the year as a whole. 2025 cut pricing reached 71bp before the February inflation data and 76bp before the February payrolls report.
- A rate cut is seen with near zero probability for March’s meeting, but the first full cut is just about priced for June, with a second nearly priced by September.
- Chair Powell has no reason to endorse or refute these expectations – he’s likely to be happy with a press conference that ends with little discernable change in pricing.
CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
- CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
