EUROPEAN FIXED UPDATE: Benchmarks bid given the overnight tone and earthquakes ahead of PCE

USTs: +5 ticks, 110-18

• A firmer start to the session for benchmarks given the tepid risk tone overnight and risk aversion entering the market on the sizable earthquakes in Myanmar. USTs hit a 110-24 peak but since pulled back modestly but remains comfortably clear of the overnight 110-15 base.


• The session ahead is focussed on US PCE, the series is forecast to remain at 0.3% M/M for both the headline and core while the Y/Y rates are seen at 2.5% and 2.7% respectively. During the FOMC presser, Chair Powell said they see headline PCE at 2.5% and the core at 2.8% in February.


• PCE will help to inform the discussion into the timing of the next Fed cut, as it stands a 25bps move is not priced until July with 63bps implied by end-2025. After the data Fed’s Barr (voter) and Bostic (2027 voter) due though we do not expect a text from either official.


• However, we are also awaiting any fresh updates on the tariff front ahead of Trump’s “Liberation Day” with new Canadian PM Carney due to speak with POTUS today after pledging to take retaliatory action and described the US as no longer being a reliable partner.


• Support comes firstly via a triple-bottom from mid-March at 111-14, then 110-12+, 110-06 before the figure and then 109-26 from February 25th. On the flip side, resistance at 110-26, 110-29, the figure, 111-03, 111-07 and then 111-13. For reference, the curve is currently bull-flattening.

Bunds: +44 ticks, 128.79

• Bid, driven higher by the overnight risk tone and earthquakes. Managed to surpass the 129.00 mark to a 129.07 peak but this proved shortlived and Bunds have since faded to the mid-point of the day’s range which has a 128.48 trough.


• The docket this morning featured preliminary March inflation figures from France and Spain, both were cooler than forecast but didn’t spark any significant/sustained move in EGBs. German and EZ figures due next week on Monday and Tuesday respectively.


• Elsewhere, the latest ECB SCE saw the inflation views maintained, however, the 12-month nominal income view increased; as above, no sustained/significant reaction.


• As with USTs, the docket ahead is focussed firstly on PCE and then for any updates on the tariff/trade front.


• For Europe specifically, more details are surfacing on how the bloc could retaliate; the FT reports that Big Tech could be targeted as part of a crackdown on US services exports. However, the FT also highlights that the bloc will be limiting fines against Apple and Meta to avoid provoking Trump. Most recently, the Commission has named PayPal as a hypothetical target.

Gilts: +51 ticks, 91.21

• Gapped higher by 25 ticks as the Gilt open roughly coincided with the high point in USTs and Bunds as the complex generally continued to climb on the broad risk tone. Since, the benchmark has eased slightly from highs but remains above the 91.00 mark.


• Data this morning saw a stronger than expected set of Retail metrics and an unrevised Q4 GDP series however the ONS added that UK GDP has been revised up by 0.1pp for each quarter between Q4-2023 and Q2-2024.


• No hawkish followthrough from the data with the broader tone dictating into PCE and tariff/trade updates and as the data does not change the picture of modest UK growth in the near term; as a reminder, Reeves’ Spring Statement saw the OBR cut the near term growth forecast in half.

28 Mar 2025 - 10:00- Fixed IncomeEU Research- Source: Newsquawk