EUROPEAN FIXED INCOME UPDATE: European paper higher alongside the soft risk tone

USTs: +9.5 ticks; 110.30+

• US paper a touch higher alongside downside in stocks and following a choppy session yesterday which saw T-notes ultimately settle lower.


• Yesterday's trade was characterised by hopes on the trade front and more conciliatory language from President Trump re Fed Chair Powell. Note, it remains to be seen if Trump's position will change next month with the Fed widely expected to stand pat on rates.


• In terms of the latest state-of-play for trade, Trump said it depends on China how soon tariffs can come down and they have spoken to 90 countries regarding tariffs already. Trump added that if they don't have a deal, they will set tariffs and could set the tariff for China over the next two or three weeks. Note, China this morning said they are not yet in trade talks with the US.


• For today's docket, data releases include US durables and weekly claims figures, whilst Kashkari is due to deliver remarks.


• Further supply looms today with a 7yr note offering due following 2 and 5yr supply earlier in the week.


• Jun'25 USTs currently within yesterday's 110.18+ to 111.18+ range. From a yield perspective, the US curve is slightly lower in the belly with no real steepening/flattening bias, whilst the 10yr yield has stabilised just above the 4.35% mark.

Bunds: +44 ticks; 131.70

• Bunds are firmer on the session after a session of losses yesterday on account of the upbeat risk tone that was triggered by optimism on the trade front and Trump remarks re Powell.


• On the trade front, not a great deal has changed for the EU with the Trump administration focusing more on the likes of India and China. However, yesterday underscored the differences between the two sides with EU's Dombrovskis stating that "Europe will NOT negotiate over value-added taxes, agricultural subsidies in tariff talks".


• Elsewhere, ECB speak has continued to lean towards suggesting that tariffs will weigh on inflation in the Eurozone, albeit there is a high level of uncertainty surrounding forecasts. ECB's Rehn has suggested that the GC should not rule out larger cuts than 25bps. A June 25bps cut is priced at 73%.


• German IFO data exceeded expectations but failed to have any material sway on prices given the headwinds facing the nation.


• Jun'25 Bunds are currently towards the upper end of yesterday's 131.11-131.93 range with the 10yr yield @ 2.477% vs. yesterday's 2.454-2.518% range.

Gilts: +26 ticks; 92.78

• UK paper is firmer after a choppy session yesterday which saw initial gains (triggered by the UK DMO issuance adjustment and soft UK PMI data) reversed following the strong risk tone in the market.


• Newsflow out of the UK remains on the light side. However, on the trade front, UK Chancellor Reeves said the UK will not rush trade talks with the US and will not relax food standards to secure a deal. Note, expectations of an imminent UK trade deal are relatively low given the complexities of such a deal and the Trump administration's apparent preference for striking a deal with India or Japan first. Today's speaker docket sees BoE's Lombardelli due to give remarks. Her comments will follow those of Greene earlier in the week who suggested that tariffs are expected to be net disinflationary for the UK.


• UK 2043 supply drew a higher b/c than previous and a smaller tail, adding to the bid in Gilts that were moving higher heading into the auction.


• Gilts are currently tucked within yesterday's 92.34-93.29 range with the 10yr yield just below the 4.55% mark after rising as high as 4.57% yesterday.

24 Apr 2025 - 10:20- ForexData- Source: Newsquawk