EUROPEAN FIXED UPDATE: Benchmarks largely in a holding pattern as we await the Rose Garden speech

USTs: -2 ticks, 111-22

• Largely in a holding pattern overnight after coming under pressure in the US afternoon/evening on the more favourable tariff reports via CNBC, marked a 111-15 overnight low. More recently, modest upside occurred in the early European morning as the general tone deteriorated a touch but this was only a handful of ticks at most with USTs holding around Monday’s 111-22+ peak, as was the case on Tuesday morning.


• Full newsquawk preview of “Liberation Day” is available on the headline feed.


• Trump is scheduled at 21:00BST. In the meantime, we have ADP as the precursor to NFP on Friday followed by Factory Orders for March. However, market focus will likely remain almost entirely on updates to the tariff front ahead of Trump’s Rose Garden announcement; thus far, the only scheduled appearance by an official before this is Commerce Secretary Lutnick at 13:30BST.


• If the data and/or tariffs spark a bullish move, resistance features at 111-30+ from Tuesday before the early March YTD peak at 112-01. After this, attention will turn to yields, the 10yr is holding just above 4.15% after hitting 4.13% on Tuesday, the early-March low is 4.106%, afterwards we have 4.03% from July 2024 before the figure itself.


• On the flip side, support comes into play at 111-11+ and 111-04 from the last two sessions, before 110-15, 110-12, 110-10 and 110-06, all lows which printed in the prior week.


• For reference, yields are currently modestly firmer and action is fairly even across the curve.

Bunds: +12 ticks, 129.40

• A touch firmer, the narrative is much the same as the above, though Bunds picked up slightly more than their US peer as the risk tone deteriorated in the early morning and have moved back into the green.


• Specifics light so far, though the near-term docket includes a 2035 Bund auction (should go well) and a slide release from ECB’s Schnabel. It will be interesting to get the thoughts of hawk-Schnabel on how the narrative has changed since she last spoke just before the March announcement, though of course her comments come ahead of POTUS’ “Liberation Day” speech.


• Currently at the top-end of a 129.11-45 band, which is entirely within Tuesday’s 128.68-129.60 range. Yields are softer at the short-end though the long-end is proving resilient and as such the curve is steeper. 10yr down to 2.66% with 2.65% the low point since Germany’s fiscal reform, and thereafter a gap to 2.42% from early-March.


• On the topic of yields, Goldman Sachs has cut its end-2025 German 10yr yield forecast to 2.8% (prev. 3.0%).


• Back to tariffs, while nothing is scheduled, some commentators expect an announcement from von der Leyen to come shortly after the Trump speech, though it is unclear as to whether this would be a formal announcement or more of an acknowledgement of the US measures. This morning, France continued its tough tone as the Industry Minister reaffirmed that Europe will respond to Trump tariffs in a proportionate manner, adding that the bloc needs to show strength.

Gilts: +3 ticks, 91.20

• In-fitting with the above though the bounce seen early doors, that took Bunds into the green as discussed, was only sufficient to cause Gilts to gap higher by five ticks and extend another two to a 92.15 peak. A high point which is shy of Tuesday’s 92.45 best.


• Since, the benchmark has retreated back towards yesterday’s 92.08 close with specifics light and the near-term docket devoid of catalysts aside from I/L supply.


• Tariffs dominate the narrative as we await Trump’s announcement. On the UK-US economic deal the Times’ Swinford reports that hopes of any last minute concessions for the UK are fading with no plans for the leaders to speak today.


• As a reminder, Swinford reported on Tuesday that the UK-US economic deal was almost ready to go aside from a few points of deliberation, but that the US was refusing to sign until “Liberation Day” measures were enacted. Today, Swinford’s sources are reportedly talking about “days or weeks” for a deal and UK concessions, but caveats that No. 10 does not know what is being planned by Trump or when carve-outs could be implemented.

02 Apr 2025 - 10:00- ForexEU Research- Source: Newsquawk