EUROPEAN FIXED UPDATE: Benchmarks are bid in limited trade pre-Easter/NFP.

Analysis details (10:40)

• A continuation of the week’s firmer action has seen fresh WTD highs in EGBs with a modest spike occurring on the March Construction PMIs in otherwise fairly limited pre-Easter/NFP trade.


• Specifically, the Bund managed to eclipse Wednesday’s 137.49 peak following the soft PMIs (and particularly the marked deterioration in Germany’s metric, though the internals were not as damming) to a current 137.85 high which matches the 27th March top. If the upside continues, a handful of late-March peaks reside around 138.40 before relatively clean air until 139.54 and 140.30 from the 24th and 20th of March respectively. Amidst this, yields continue to slip though similarly are someway off of the corresponding 1.994% and 1.92% 10yr lows. Data aside, a text release from ECB’s Chief Economist Lane covered fairly familiar ground with the official stressing data-dependence and making clear that the impact of developments such as the OPEC+ voluntary cut are highly uncertain given broader energy/inflation dynamics.


• Outside of the core, periphery benchmarks are currently bolstered to a similar degree with measures such as the BTP-Bund yield spread holding steady in very familiar parameters as we await fresh guidance/inputs on the ECB’s policy direction.


• For Gilts, the story is much the same with a firm bid seen though the 105.00 mark remains around 15 ticks above the current best; in a similar vein to their German peer, a cluster of levels lie between 105 and 106 before the 24th and 20th March peaks at 107.27 and 107.33 respectively.


• Finally, USTs are slightly firmer but are yet to rise meaningfully away from the neutral mark with the 10yr in fairly slim ~14 tick parameters. Tentative action which comes ahead of the sessions Fed speak via non-voter hawk Bullard after weekly jobs data; though, as above, market focus is firmly on Friday’s NFP report which takes place in limited/thin market conditions before next week’s CPI. Measures which will be scoured in the context of a data-dependent/meeting-by-meeting Fed; currently, market pricing is incrementally in favour of an unchanged outcome for May’s announcement.

06 Apr 2023 - 10:39- Fixed IncomeResearch Sheet- Source: Newswires