EUROPEAN FIXED UPDATE: A firmer start to the day but benchmarks are currently set to end a tumultuous week back where they started

USTs: +8 ticks, 110-16

• A firmer start to the day as benchmarks continue the data-induced upside from Thursday with newsflow since a little light and markets largely awaiting updates on numerous geopolitical situations (see Commodities).


• At the top-end of a 110-10 to 110-20 band. As it stands, on track to end the week almost flat, opened the week at 110-18, despite the marked pressure seen in the first half on US-China progress. Trade developments that sparked notable hawkish action Monday through Wednesday, before being offset by Thursday’s data deluge.


• Ahead, the docket is comparably light but does feature Building Permits/Housing Starts, Import Prices (factor into PCE) and the prelim. Uni. of Michigan series for May; the latter series, in April, came in softer than expected for conditions, expectations and sentiment while the price indicators jumped - i.e. a stagflationary series.


• Given the above, yields are lower across the curve which is marginally flatter at the time of writing. As above, the hawkish action seen in yields at the start of the week has almost entirely eroded and the 10yr is on track to end the week within a bps of where it began.

Bunds: +47 ticks, 130.40

• In-fitting with USTs, but with action slightly more pronounced as EGBs experienced a marginal rally early doors as European players entered the fray and reacted to the bullish bias of APAC trade.


• Specifics light. A few ECB officials on the wire but nothing that has fundamentally shifted the narrative.


• Docket ahead is very light for almost all of the European session with impetus likely to be taken from the US points and any broader macro updates. However, the tail-end of the session features a text release from ECB Chief Economist Lane.


• Lane has spoken since the April gathering, outlining that uncertainty could mean a big or small policy response. Note, Lane is on the docket next week and somewhat interestingly is due to speak on negative rates.


• Just off highs in a 130.11-50 confine and, as with USTs, near-enough on track to end the week flat despite a WTD range in excess of 135 ticks.

Gilts: +43 ticks, 91.90

• Outperforming slightly, likely on account of the marginal underperformance vs Bunds seen at points this week and as such, the UK is catching up on the final session of the week.


• As above, Gilts are also set to end the week essentially unchanged, currently just off highs in a 91.84-92.00 band. Resistance at 92.59 from mid-April and thereafter 93.00 before highs from the last few weeks, beginning at 93.59.


• Specifics largely non-existent as participants count down to next week’s packed UK data docket, incl. CPI, and the EU-UK Brexit reset meeting on Monday. A meeting that, unsurprisingly, has seemingly already fallen victim to the usual sticking points of fishing and the movement of young people.

16 May 2025 - 09:55- Fixed IncomeEU Research- Source: Newsquawk