NATO: Trump: US Needs Nothing From NATO

The 2.70% figure has contained downside in 10-year Bund yields so far today.  Risk sentiment looks set to dominate core FI price action again given the light data calendar, with tariff/AI concerns still at the fore.

• The German curve has marginally bull flattened, with Schatz yield movements still limited by steady ECB expectations.
• Bund futures are +8 ticks at 129.69. A bull cycle remains intact, with the contract having traded to a fresh short-term cycle high. The break of resistance yesterday opens 129.89 next, a Fibonacci projection.
• Spain is holding a 30-year syndication today, with books already in excess of E110bln. MNI expects a E5-8bln size, while a Reuters source suggests Treasury looks for E6bln. The EFSF is also holding a 5-year syndication, while Italy sold BTP Short Term/BTPei’s earlier.
• 10-year EGB spreads to Bunds are little changed. The BTP/Bund spread is currently 61bps, having exhibited impressive resilience through yesterday’s risk-off dynamics.
• In data, French INSEE business confidence for February was disappointing (97 vs 99 cons and prior). 

Figure 1: 10-year Bund Yields (Source: Bloomberg Finance L.P)

Bonds have edged higher through the London morning, with a dovish impulse from Japan and move away from session highs in European equity benchmarks providing support.

• Solid to strong demand at the latest 7-Year gilt auction helps underpin UK paper in more recent trade.
• Futures trade as high as 93.03.
• Key resistance at the January 14 top (92.95) is breached, deepening the bullish technical theme. Next resistance of note located at 93.16.
• Roll turnover continues to support activity ahead of Thursday’s first notice for the H6 contract, representing ~85% of turnover on the day.
• Yields flat to 1.5bp lower, curve flattens.
• 10s threaten a clean break below the next downside level of note (4.30%) after the recent break below medium-term trend support.
• 30s 2-3bp off year-to-date yield lows, but also through medium-term trend support drawn off Q4 ’22 lows.
• 2s10s set for the first sub-75bp close since mid-January, while 5s30s is still ~5bp above February closing lows.
• SONIA futures little changed, with BoE-dated OIS pointing to 2 further BoE rate cuts come year-end.
• This afternoon (14:15 London) will see BoE’s Bailey, Pill, Taylor and Greene testify ahead of the Treasury Select Committee with respect to the February MPR. There will also be annual reports published by Bailey, Greene and Pill. The main focus here will be on Bailey's views. We will be looking for how the Governor characterises the recent data and whether he provides any concrete hints or guidance as to whether he will support a March cut or not. Note that he said it was close to 50/50 ahead of last week’s inflation & labour market releases.