EUROPEAN FIXED INCOME: FTQ drives a bid into core paper

USTs: +13 ticks; 110.04

• USTs have marched higher in early trade with a safe-haven bid emerging from comments by the Russian Kremlin that it could respond to aggression in a nuclear manner. Fresh US-specific macro drivers are currently lacking in what is set to be a week that contains a light data slate. As such, near-term attention will be on who President-elect Trump opts to select for the position of Treasury Secretary. ING opines that "a candidate with proven reliability will be well-received by the bond markets, while those with less experience – or perhaps a candidate that will offer less of a counterweight to some of President-elect Trump's plans – could see the long end of the US Treasury market sell-off and perhaps even soften the dollar too".
• Dec'24 UST cleared a slew of highs from last week as well as the 110 mark and matching the 12th November high @ 110.04. The US curve is currently marginally bull steepening. The US 10yr yield has continued its retreat from last week's multi-month peak @ 4.505% with the current session low @ 4.345%.

Bunds: +86 ticks; 132.80

• Bunds higher in-fitting with global counterparts as macro updates from the Eurozone remain light for today's session thus far. Yesterday saw ECB's Makhlouf remark that the evidence would need to be overwhelming for a 50bps rate cut at the December meeting. Flash PMI metrics on Friday could be a potential inflection point given the GC's increased focus on growth dynamics. Until then, conviction about the ECB's next moves will likely be limited. As it stands, markets around a 22% chance of a 50bps cut next month.
• Bunds have taken out a slew of highs from last week with the next upside target coming via the 133 mark with the 30th October high just above @ 133.02. The pullback in the German 10yr yield has been relatively aggressive with the benchmark briefly slipping below 2.3% vs. yesterday's 2.4%+ levels; largest intra-day decline since mid-June.

Gilts: +79 ticks; 94.53

• Focus in the UK today will fall on BoE's Bailey, Lombardelli, Mann & Taylor's appearance at the Treasury Select Hearing on the November Monetary Policy Report. Mann will naturally strike a hawkish tone, however, attention will be on the other three and what indications there are over a consensus going forward. That being said, the Bank is widely expected to hold rates next month. ING notes that the MPC will likely not have much more confidence than it currently does that the inflation outlook is improving until February. UK 2038 supply is due at the top of the hour.
• Dec'24 Gilt has gained a firmer footing on a 94 handle that was acting as resistance in recent sessions. Having cleared 94.50, the next upside target comes via the 1st November high @ 94.73. The UK 10yr yield is currently supported by the 4.4% mark.