BONDS: Underpinned Following French CPI & Risk-Off Trade In Asia
Feb-28 10:35
Core global FI markets consolidate most of the gains driven by increased tariff risks and softer-than-expected French CPI data.
- Roughly in line German regional CPI data helped limit the rally, but a second-round bid has become apparent in recent trade.
- Elsewhere, downticks in oil provide some background support for bonds, although TTF prices continue to move higher, providing some offset.
- Bund futures trade as high as 133.46, shy of initial resistance at 133.71.
- Yields 2.5-3.5bp lower on the German curve.
- ASWs widen given the risk off move, Buxl leads +1.2bp vs. 3-month Euribor.
- EGB spreads little changed to 1bp wider vs. Bunds given the risk-off start, although the recovery from lows in equities limits that move.
- Quarterly rolls inflate volumes in EGB futures.
- Month-end extension flow should be more supportive for EGBs than for gilts.
- ECB-dated OIS shows ~88bp of cuts through year-end vs. ~86bp late yesterday.
- In the UK, macro impulses comfortably outweigh hawkish leaning comments from BoE’s Ramsden.
- Gilt futures near initial resistance at 93.51. A break there would expose the Feb 6 high & bull trigger (93.83).
- Yields 2.5-4.5bp lower across the UK curve, flattening
- 10s ~1bp tighter vs. Bunds, spread trades away from 210bp.
- BoE-dated OIS shows ~58bp of cuts through year-end vs. ~56bp late yesterday.
- National German CPI & U.S. PCE data eyed from here.
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GERMAN AUCTION RESULTS: 2.50% Feb-25 Bund
Jan-29 10:33
| 2.50% Feb-35 Bund | Previous | |
| ISIN | DE000BU2Z049 | |
| Total sold | E4.5bln | E5bln |
| Allotted | E3.439bln | E3.781bln |
| Avg yield | 2.54% | 2.51% |
| Bid-to-offer | 2.17x | 1.60x |
| Bid-to-cover | 2.84x | 2.12x |
| Average Price | 99.67 | 99.90 |
| Low acc. Price | 99.67 | 99.88 |
| Pre-auction mid | 99.635 | |
| Previous date | 08-Jan-25 |
RIKSBANK: Thedeen Continues With Cautious Press Conference Tone
Jan-29 10:27
Thedeen continues to strike a relatively cautious tone at the Riksbank press conference.
- He has repeatedly stressed the uncertainty of the December rate path, and in doing so did not provide a view on whether the path has upside or downside risks.
- He notes that more information will be available in March, when the next projection will be put forward.
- This caution may be factoring into SEK strength against the EUR over the last 15/20 minutes, but as noted above, the single currency remains under pressure more broadly against the G10.
- Initial support in EURSEK is the Jan 22 low at 11.4389.
UK: Chancellor-'Productive Capacity Of UK Has Become Far Too Weak'
Jan-29 10:26
Delivering a speech on growth, Chancellor of the Exchequer Rachel Reeves says "Productive capacity of the UK has become far too weak." Reeves: "The solution is government systematically removing barriers...The strategy that I have consistently set out is to drive the supply side of the economy."
- Reeves says her growth strategy has three prongs: Stability, Reform and investment
- Reeves acknowledges her increase in National Insurance on business has consequences on business and beyond- 'I accept there are costs to responsibly. But the costs of irresponsibility are far higher. Those who opposed my Budget know that too'
- On trade and international relations
- Reeves: "We will work with the US to deepen our economic relationship in the months and years ahead."
- Reeves: "We will prioritise proposals with the EU that are consistent with our manifesto."
- Reeves: "The business and trade minister will travel to India to restart talks on a new trade deal.
- Reeves: "We will protect the important role of pensions in the gilt market while giving additional flexibility." Says that after talking with regulators, an action plan will be published in March that seeks to aid being more agile to help businesses.
