EUROPEAN FIXED INCOME UPDATE: Mixed start to the week as markets lack fresh macro impetus

USTs: -0.5 tick; 109.16

• Minor losses for the Dec'24 UST with prices currently in consolidation mode after the election. From a monetary perspective, last week saw US CPI and comments from Fed Chair Powell. Some of the dovish repricing from the former was unwound by the latter after the Fed Chair underscored that the economy is not sending signals that the Fed needs to be in a hurry to lower interest rates. As it stands, markets currently assign a circa 63% chance of a cut.


• The Dec'24 UST contract is currently within Friday's 108.30-109.23+ range; the lower bound of which was a contract low. The US yield curve is marginally bull-steepening with the 2s10s wider by around 14bps. The US 10yr yield is currently just below the 4.45% mark. Note, it went as high as 4.505% last week; highest since 31st May.

Bunds: -36 ticks; 131.84

• Marginally lower in a slight unwind of some of last week's upside. Macro focus around the Eurozone remains on the growth outlook with ECB's de Guindos this morning remarking that this is where the Bank is currently focusing. Political instability in France and Germany as well as the threats from the Trump presidency on the Eurozone loom large on this front. For now, markets price in a 28% probability of a larger 50bps ECB cut next month. A soft outturn for Friday's PMI metrics could bolster bets for such a move.


• The Dec'24 Bund contract is currently lingering below the 132 mark and towards the bottom end of Friday's 131.79-132.46 range. The German curve is modestly bear-flattening with the 10yr yield just shy of Friday's peak @ 2.384%.

Gilts: +7 ticks; 93.81

• Marginally softer, in-fitting with price action in global peers. The macro narrative towards the back-end of last week was characterised by the soft outturn for Q3 UK GDP. This week, data will remain in focus with UK CPI, retail sales and PMI metrics all due on deck. The services component of the inflation release is the likely highlight. However, market pricing is firmly in favour of the MPC standing pat on rates next month. Looking ahead to 2025, markets price in around 63bps of easing by year-end.


• The Dec'24 Gilt contract is currently capped by resistance at 94.00 which coincides with Friday's peak. The UK 10yr yield currently lingers just above Friday's trough @ 4.46%.

18 Nov 2024 - 10:00- Fixed IncomeData- Source: Newsquawk