EUROPEAN FIXED UPDATE: Benchmarks bid into April 2nd but USTs and Bunds remain around/shy of Monday's peaks

USTs: +13 ticks, 129.36

• Firmer, and while the move is significant on the session, USTs are yet to surpass the top-end of yesterday’s 111-04 to 111-22+ band. Overall, the narrative remains much the same as markets countdown to "Liberation Day" and await any possible announcements/details on the eve of it.


• If Monday’s best is breached, resistance comes in 112-01 from March 4th. Yields once again find themselves lower across the curve, with the 10yr further below the 4.20% mark to a 4.17% low. As a reminder, 4.10% is the YTD low from March 4th.


• While we await tariff developments there are a few points on the docket which may be sufficient to break USTs from their holding pattern around Monday’s peak. Namely, Fed’s Barkin on the economy before the ISM Manufacturing PMI, consensus looks for the headline to fall to 49.5 from 50.3 in March and JOLTS data for Ferbuary which is expected to see openings fall to 7.616mln from 7.74mln

Bunds: +52 ticks, 129.35

• A similar narrative to USTs with Bunds firmer and at a 129.42 peak but shy of Monday’s 129.59 best. If that is surpassed, resistance features at 130.00 before 130.93 from mid-January.


• Again, we await any fresh updates on what the "Liberation Day" measures will entail prior to their announcement. In terms of a response, Commission President von der Leyen this morning outlined that all instruments are on the table for countermeasures and they have a strong plan for retaliation which will be enacted if required.


• The bid this morning in EGBs, and fixed generally, comes as the market is seemingly, for now at least, more concerned with the growth implications than the inflation implications of the looming US measures.


• Tariffs/trade aside, the morning has seen modest downward revisions to March’s Manufacturing PMIs and commentary from ECB’s Cipollone, though no significant or sustained followthrough emanated from this.


• Most recently, EZ HICP printed in-line on the headline and cooler than expected for the core and super-core Y/Y. Additionally, the Services Y/Y figure moderated to 3.4% (prev. 3.7%). Despite this, the market reaction has been minimal and if anything slightly on the hawkish side, perhaps given the jump in the super-core M/M or with Bunds simply just fading the modest move higher into the data.


• Post-HICP, markets imply a 77% chance of a 25bps cut in April with 60bps seen by end-2025, pricing is essentially unchanged vs pre-release.


• Elsewhere, and more for OATs, there remains significant focus on Le Pen after Monday’s long-awaited court ruling. As it stands, she will be appealing the verdict and is pushing for this to occur and be ruled on prior to the 2027 Presidential election. If she is ineligible, the likely RN alternative is Bardella; though, as highlighted in our commentary yesterday, some members of RN do not believe he is the correct alternative.

Gilts: +65 ticks, 92.34

• Bid but, unlike its peers above, has managed to eclipse Monday’s 92.10 high to a 92.45 peak for the week. A level which encounters resistance from earlier in the month at 92.46, 92.48 and 92.56.


• Newsflow has unsurprisingly been focused on tariffs, with reports indicating that the UK-US trade deal has broad agreement and is ready to be signed once a few details are ironed out; however, the US is waiting for "Liberation Day" measures to be announced. In-fitting with this, UK Business Secretary Reynolds this morning said "It appears tomorrow there'll be no country in the world exempt from the initial announcements", via BBC


• Furthermore, PM Starmer remarked that discussions are well advanced on an economic deal.


• BoE’s Greene stated that while increasing UK public inflation expectations are concerning, she thinks they remain anchored and is happy with the central inflation forecast. On the labour market, outlined that slack is beginning to open up and said there is a risk that a productivity growth recovery does not happen as they are forecasting. No significant move as her commentary crossed, though it may have added to the underlying bullish-bias.

01 Apr 2025 - 10:20- Fixed IncomeEU Research- Source: Newsquawk