EUROPEAN FIXED INCOME UPDATE: mixed performance for paper, US 10yr supply looms

USTs: -3 ticks

• Back in negative territory after support from a Reuters report noting that China could be willing to let the Yuan devalue next year, proved to be short-lived. Markets await today's US CPI report with expectations for a core M/M print @ 0.3% and Y/Y @ 3.3%. ING noted yesterday 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". Elsewhere, today's docket includes a 10yr note offering after yesterday's relatively average 3yr auction. Mar'25 contract is currently tucked within yesterday's 110.26-111.09 range. The US yield curve is a touch higher with no flattening/steepening bias. The US 10yr yield remains clear of last Friday's post-NFP trough @ 4.126% but just shy of yesterday's 4.246% high.

Bunds/OATS: Bunds +15 ticks. OATs +3 ticks

• Today is seeing a minor reversal of the recent outperformance of French paper over its German counterpart. European paper was dealt some minor support in early trade following the aforementioned Reuters source report on China. Closer to home, focus remains on tomorrow's ECB rate decision which is expected to deliver a 25bps rate cut. In terms of the latest for French politics, yesterday evening it was reported that President Macron told party leaders he would appoint a PM within 48 hours. The DE/FR 10yr spread has stabilised just above the 75bps mark. Bunds failed to hold above 136 and sits towards the middle of yesterday's 135.75-136.26 trading range. The corresponding 10yr yield remains supported at 2.1%.

Gilts: +13 ticks

• UK paper reversing some of yesterday's selling which didn't appear to be driven by an obvious catalyst at the time. 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 currently towards the bottom end of yesterday's 95.13-73 trading range. UK 10yr yield still above 4.3%.

11 Dec 2024 - 09:55- Fixed IncomeData- Source: Newsquawk