EUROPEAN FIXED UPDATE: Benchmarks attempt to recoup CPI-driven losses into PPI though geopols is capping

USTs: +5 ticks, 108-14

• Gradually lifting off the CPI-driven 108-04 WTD trough. As such, USTs find themselves comfortably in the green and around 10 ticks above that mark at best. Focus for the session ahead is on PPI.


• A print which, provides another point of insight ahead of PCE on February 28th; as a reminder, Chair Powell post-CPI made clear that PCE is the preferred measure for the Fed and they will have insight on it after PPI.


• Other Fed officials have acknowledged the particularly hawkish Wednesday release with Goolsbee (2025 voter) labelling it as “sobering” while Bostic (2027 voter) said they need more economic clarity before moving rates again.


• Inflation aside, the other focal point for today thus far at least has been geopolitics. With the constructive tones around Ukraine bolstering risk sentiment this morning and perhaps serving to temper any more significant rebound in fixed income; though, the underlying US narrative is very much one of waiting for PPI for PCE insight.


• Ahead, weekly claims prints alongside PPI though the jobs metrics do not coincide with the BLS period. Thereafter, 30yr supply due and in focus after the 10yr tailed by 0.9bps and the b/c came in softer than the prior and six-auction average.

Bunds: +18 ticks, 132.33

• Firmer, also picking themselves up from their 132.10 US CPI-driven WTD low. However, and similarly to USTs, they have only managed to lift modestly from this to a current 132.38 session high; with the constructive geopolitical risk tone seemingly preventing a more pronounced move just yet in Europe.


• On this, some modest pressure was seen around reports in AFP that there is progress towards ending the Gaza truce crisis. Before that, no reaction to unrevised German inflation data or any pronounced follow through from UK data.


• ECB’s Nagel scheduled for later in the session where the focus will be on the fortunes of Germany after the Economy Ministry’s report noted that an economic recovery is not yet evident at the beginning of the year; still no sign of turnaround in the industrial economy, with concerns about job security and ongoing political uncertainties to hinder a recovery


• The session ahead will likely be dominated by any tariff/geopolitical newsflow alongside the mentioned US inflation metrics; if an extension of existing action is seen then we firstly look to Wednesday’s 132.79 peak before the figure and then 133.53 and 133.61 from Tuesday and Monday respectively.

Gilts: +21 ticks, 92.66

• Firmer, following the above. Gapped lower by nine ticks to a 92.36 low as the benchmark reacted to December/Q4 GDP data. Releases which were stronger than expected across the board and serve to provide the Chancellor with some much needed positive growth news after recent reports around the OBR.


• Furthermore, the release modestly tempered BoE cut expectations with 50bps no longer priced by September; specifically for September -47bps priced vs. -50.1bps pre-release.


• Ahead, the docket is dominated by US events as discussed with no UK-specific catalysts scheduled.

13 Feb 2025 - 09:55- Fixed IncomeData- Source: Newsquawk