EUROPEAN FIXED UPDATE: Bunds await the Bundestag debate while USTs look to PPI and shutdown developments

Bunds: -2 ticks, 127.02

• A lot of newsflow to get through for Germany but the TL/DR is that we are awaiting updates on fiscal reform and coalition talks at various points today, with the Greens reporting no progress thus far. Into this, Bunds trade in proximity to the unchanged mark but have been coming off the overnight 127.53 peak throughout the morning and currently reside at a 127.02 base.


• Pressure comes amid the potential for German fiscal reform, possible EZ-wide fiscal measures, ongoing sovereign (i.e. Greece) and corporate supply announcements alongside the looming US fiscal deadline (see USTs section below) and a modest, but relative, recovery in the risk tone; not to mention tariff/trade concerns and upcoming PPI as other potential factors.


• Politico reported that CDU’s Merz wishes to speed up the coalition negotiation process, with talks set to begin today at 17:00GMT. Working groups have been instructed to complete work by March 24th, with Merz aiming to take the Chancellory ideally before Easter or if not the week after.


• More pertinently, in the short term at least, fiscal reform will be debated in the Bundestag today from 11:00GMT for around a three hour period. The main officials involved will each outline their approaches and views before a general debate. Negotiating updates have been light, but CDU/CSU and SPD were speaking with the Greens throughout Wednesday’s session; Handelsblatt highlighted the talks ended without a press briefing or comment on the discussion or results.


• Most recently, the Greens have said there has not been any progress on talks with CDU/CSU and SPD. An update which lifted Bunds by around 25 ticks though this has since entirely pared with participants awaiting the debate to see if this is correct or just a negotiating tactic.


• While we wait to see what, if any, amendments have been made to the fiscal reform plans in the mentioned negotiations it is worth reminding that the current schedule is for the reform to progress through the Bundestag early next week with the goal of a 3rd reading on March 18th. While these dates can be postponed if needed, it would open the door to more legal challenges and possibly jeopardise the Bundesrats timeline for ratification of the constitutional reform.


• Elsewhere, ECB remarks this morning have perhaps had influence with Kazaks suggesting they cannot say everything is done on inflation while Nagel said tariffs could see Germany enter a recession in 2025. Numerous more officials are scheduled ahead including Makhlouf, Holzmann and Villeroy.

USTs: -2 ticks, 110-18+

• Feeling some pressure in-fitting with EGBs, with USTs moving to the unchanged mark at around the same time as Bunds having also pared from a 110-28 overnight peak to a current 110-19+ low; a move which also occurred alongside a modest and relative improvement in the risk tone.


• Further pressure for USTs stems from Friday’s looming US fiscal deadline with the federal government currently set to shut down at midnight. As it stands, Senate Democrats have said they will not give Republicans the required votes to pass the CR.


• Punchbowl outlines two options ahead where a deal could be done to extend funding until April 11th, though Majority Leader Thune (R) has said Dems. are yet to present an offer to enable this. Alternatively, the Dems don’t provide votes and the government shutdown, though it is unclear what they would get out of this.


• For today though, data is in focus with PPI due following the cooler-than-expected CPI on Wednesday, though much of the moderation in CPI was driven by components which do not factor into PCE. PPI is forecast to ease to 3.3% Y/Y from 3.5%, while the core rate is seen falling to 3.5% Y/Y from 3.6%. Elsewhere, weekly claims are due but neither metric coincides with the BLS window.


• Finally, supply remains in focus with 30yr Bonds rounding off the week’s sales after a tepid 3yr and better-than-previous 10yr note sales.


• If the discussed pressure continues then Wednesday’s base is the first point of support at 110-15+ before 110-15 and then 110-12 from the prior week. From a yield standpoint, the 10yr encounters recent highs at 4.33% and 4.34% respectively.

Gilts: -4 ticks, 91.30

• Essentially unchanged and once again tracking peer with newsflow light and no supply scheduled. Incremental updates on cost-cutting measures of note, see below, but not a mover for Gilts this morning which are at the lower-end of a 91.31-91.53 band.


• UK PM Starmer outlined a speech he will deliver later today in the Telegraph, in which he said they are to target cutting the administrative costs of regulation by 25% and said the state has been blocking infrastructure projects.

13 Mar 2025 - 10:00- Fixed IncomeData- Source: Newsquawk