EUROPEAN FIXED UPDATE: Concession/RBNZ perhaps factor in comparably contained trade ahead of ISM Services

Analysis details (10:40)

• Overall, a comparably contained morning for the fixed complex after a holiday-thinned APAC session ahead of US data and Central Bank speak. Note, the RBNZ was more hawkish than expected overnight and may be a factor behind the hawkish direction of action thus far; though, again, we remain comfortably within recent ranges.


• Specifically, the Bund is at the session low of 135.85 vs initial 136.56 peak, despite the circa 50-tick decline the benchmark remains an equal distance from Tuesday’s 135.59 trough and thereafter the WTD 135.15 low. Newsflow has once again been particularly light, with the mentioned downside perhaps being induced once again by concession for both corporate and sovereign issuance. For the EZ, Germany’s 2029 Bund was comparable to its last outing and has seemingly caused a very modest bounce in Bunds off the above low. Otherwise, EZ-specific developments are essentially non-existent with marginal revisions to March’s PMIs not causing any sustained reaction though we are attentive to a speech from ECB’s Chief Economist Lane at 15:00BST. Albeit, Lane has spoken on a few occasions since the last policy announcement with his remarks largely sticking to the playbook outlined by Lagarde. Nonetheless, any fresh insight from the Chief Economist, particularly into the inflation implications from OPEC+ action, will be closely watched for.


• Gilts are similarly pressured and are the incremental laggards at the time of writing, though in a similar vein to their EGB peer remains above the last two sessions 103.27 and 102.99 lows. UK specific developments have been light, with PMIs as above and Brexit related updates not deemed pertinent enough to spark any action. UK supply was well-received and markedly better than the last two outings though no marked Gilt upside has occurred just yet.


• Stateside, USTs are directionally in-fitting with the above but with magnitudes even more contained as we count down to ISM Services and Fed’s Mester before attention turns fully to the March jobs report on Good Friday. As it stands, the yield curve is flatter with action much more pronounced at the short-end of the curve given the pronounced post-JOLTS action from the belly-down on Tuesday.

05 Apr 2023 - 10:41- Research Sheet- Source: Newsquawk