EUROPEAN FIXED INCOME UPDATE: Paper off best levels as China spurred risk-on price action

USTs: -1.5 ticks

• Mar'25 UST contract is a touch lower after pulling back from highs after positive commentary from the Chinese Politburo which noted that fiscal policy is to be more proactive next year, whilst monetary policy is to be moderately loose; first shift in monetary policy since 2011. In terms of US specific updates, there was a slew of Fed speak ahead of the blackout period which didn't move the dial either way. US President-elect Trump over the weekend said he has no plans to remove Powell and said he cannot guarantee Americans will not pay more as a result of tariffs. This week's main focus will on Wednesday's US CPI data (0.3% M/M core expected). Post-NFP on Friday, odds of a 25bps cut sit @ 87%. The US yield curve is marginally higher with no flattening/steepening bias. The US 10yr yield is back above 4.15% after delving as low as 4.126% on Friday. Mar'25 UST is currently tucked within Friday's 110.28+ to 111.20+ range.

Bunds/OATs: Bunds +8 ticks/OATs +10 ticks

• European paper is a touch higher but off best levels following updates out of China. For the Eurozone this week, focus will largely be on the ECB's rate decision which is expected to see the GC deliver a 25bps rate cut with policymakers refraining from publicly backing a 50bps move ahead of the meeting. ING suggests that accompanying macro projections could be seen as stale given that the cut-off date did not encapsulate the latest French political woes. On the subject of France, Macron is still consulting with the left and independents over who could become the next PM with centrist Bayrou currently the lead candidate, according to Eurasia's Rahman. Bunds are currently holding above the 136 mark and within Friday's 135.94-136.52 range, with the corresponding 10yr yield back above 2.1%.

Gilts: +21 ticks

• Marginally higher after moving sideways for the past few sessions. As has been the case for the past several sessions, fresh UK drivers have been lacking and that could remain the case for the coming sessions with just UK M/M GDP on the docket. This is seen as a volatile data series and is currently playing second-fiddle on the MPC to services inflation and real wage growth. Furthermore, only around 2bps of loosening is priced for the BoE's December meeting with the Bank not expected to move until next February. As it stands, the Mar'25 Gilt contract has met resistance at 96.00 with the corresponding 10yr yield holding above 4.25%.

09 Dec 2024 - 10:05- Fixed IncomeData- Source: Newsquawk