DECEMBER 10, 2024 AT 09:55 AM
EUROPEAN FIXED INCOME UPDATE: Choppy trade for European paper, US awaits 3yr supply
Source
SectionMarket Analysis
USTs: -1.5 ticks
- USTs are incrementally extending on yesterday's losses following a bout of selling pressure in early European trade. Fresh macro drivers for the US are lacking as markets await tomorrow's US CPI report with expectations for a core M/M print @ 0.3% and Y/Y @ 3.3%. ING notes that inflation has been running around these levels for the past few months and if consensus is confirmed, "it's hard to get overly bullish on Treasuries". Before then, the market will need to digest today's USD 58bln 3yr supply. The Mar'25 UST contract is below yesterday's 111.04 low with the next target coming via Friday's trough @ 110.28+. The US curve sees yields slightly higher in the belly but only marginally so. The US 10yr yield is above 4.2% after basing out at 4.126% post-NFP last Friday.
Bunds/OATs: Bunds +13 ticks, OATs +27 ticks
- A particularly choppy morning for German paper with the Mar'25 Bund contract continuing to oscillate around the 136 mark. Fresh macro drivers for Germany are lacking with the broader focus for the Eurozone this week on Thursday's ECB rate decision with a 25bps rate cut priced @ 85%. French paper is marginally outpacing its German counterpart with the DE/FR spread narrowing to 74bps vs. yesterday's opening levels of 76bps but wider than Friday's 72.4bps trough. In terms of the latest for French politics, President Macron is to convene Tuesday all political parties willing to compromise to form a Government, according to Reuters. The German 10yr yield remains above the 2.1% mark.
Gilts: -7 ticks
- Gilts are a touch lower with UK paper having moved broadly sideways in recent sessions. It remains the case that fresh macro drivers for the UK are lacking and potentially set to stay that way with Thursday's monthly GDP print unlikely to be a gamechanger for the BoE. Note, next week will see things pick-up markedly with UK flash PMIs, jobs, CPI, retail sales data and the BoE policy announcement all due on deck. On the latter, just 2bps of easing is priced in for the meeting. Mar'25 Gilt is back below the 96.00 mark with a session low @ 95.42, whilst the corresponding 10yr yield briefly rose above 4.3% for the first time since November 28th.