EUROPEAN FIXED UPDATE: Benchmarks lower with the European tone and supply weighing

USTs: -4 ticks, 110-13

• A softer start to the session with the European risk tone firmer and supply weighing on benchmarks generally. Action which is a continuation of the sizable moves from Monday, which sent USTs to a 110-15+ base, a low that has since been taken out to a 110-12+ WTD trough.


• Specifics a little light in the European morning with overnight newsflow featuring numerous extensive tariff updates, but nothing that has fundamentally shifted the fixed income dial from yesterday’s tax/tariff revenue reports and strong services PMI.


• Benchmarks generally bounced very modestly ahead of the German data window with the Ifo print sparking a reversal of this in USTs, see below for more; leaving the benchmark in the red but off lows into the US afternoon which features a handful of Fed speakers, 2yr supply and Consumer Confidence, Home Sales & Richmond Fed.

Bunds: -36 ticks, 110-14

• Softer in-fitting with USTs into data. Just before the Ifo release Bunds bounced off worst and got back to the mid-point of parameters at that time, but failed to re-approach the existing 128.35 session high.


• Ifo itself was firmer than the previous release across the board with expectations and conditions printing above consensus while climate was in-line. A release which added to the bearish bias in fixed income and sent Bunds below the 128.00 mark around 10-minutes after the print. Currently just off a 127.89 base.


• In the near-term, supply is in focus with a 2030 Bobl tap scheduled and also likely adding to the bearish action. An outing which should go well given the recent sell off in German bonds, providing outright concession. Note, the readacross from the curve is a little more mixed for Bobls as the recent steepening means they are cheaper vs Schatz but richer against Bunds.


• Elsewhere, the discussed US factors will draw influence while the bloc awaits remarks from ECB’s Holzmann and Nagel, both regarded as being hawks.


• If the pressure continues then support comes into play at 127.45 from March 18th while the 10yr yield first encounters resistance at 2.855% from the same session.

Gilts: -11 ticks, 91.19

• Weighed on by the above and also as we count down to the Spring Statement. Fresh reporting ahead of this that the OBR’s growth forecast will be essentially cut in half from the 2% level outlined in the autumn.


• Further to this, the FT reports that Reeves GBP 9.9bln of golden rule headroom has been wiped out and shy is around 4bln into the red. As such, she is expected to outline over 5bln of extra spending cuts and focus on potential favourable relations with the US and EU.


• Gilts are weighed on into the statement with the Chancellor’s hand a poor one and her seemingly set to undertake significant spending cuts to balance the books and then to provide herself with a buffer; reminder, reporting last week labelled her planned measures as the largest since austerity.


• As such, while faring slightly better than Bunds currently, the benchmark finds itself at a 91.06 trough which is the lowest since March 6th when 90.71 printed. Below this, the contract low is someway below at 89.23 which occurred when the 10yr yield got to a 4.925% peak.

25 Mar 2025 - 10:05- Fixed IncomeEU Research- Source: Newsquawk