EUROPEAN FIXED UPDATE: Benchmarks ease and yields rise pre-NFP

Analysis details (10:29)

• Bunds gapped lower in APAC hours but held around 135.20 before picking back up by around 20 ticks just before the entrance of European players. At which point Bunds began sliding and have thus far hit a 134.91 low which brings into play the 134.55 trough from Wednesday. A move which occurred without a fresh specific driver but is in-fitting with price action seen in USTs ahead of the key November Payrolls report at 13:30GMT.


• Elsewhere, Gilts are directionally in-fitting but the magnitude of the move is much more pronounced as Gilts teeter on the 98.00 handle and post losses of 60+ ticks on the session. A move that echoes the last few sessions’ bias as participants continue to trim dovish rate expectations for 2024 going into next week’s BoE announcement, which is likely to see a hawkish hold. While Gilt action is relatively pronounced, it remains well within recent bounds and as such the accompanying pressure to the SONIA strip has thus far only managed to bring December back to unchanged being fully priced.


• Back to USTs which are currently lower by 11 ticks with fresh macro drivers non-existent as participants position themselves for the November NFP report, ahead of Tuesday’s CPI and thereafter the FOMC meeting begins. For NFP, consensus is 180k (prev. 150k) with a range of 100-275k. As part of the weekly Flow Show, BofA writes that a print between 125-175k will maintain the winter narrative, but a sub-100k figure would signal a hard landing is on the horizon, in a similar vein to the ISM report. Interestingly ahead of the data, US yields are bid across the curve and rising/testing yesterday’s peak in the first concerted move this month.

08 Dec 2023 - 10:32- Research Sheet- Source: Newsquawk