EUROPEAN FIXED UPDATE: Contained trade into PCE and Fed speak

USTs: +5 ticks, 108-24+

• Modestly firmer but yet to significantly deviate from the unchanged mark in 108-19+ to 108-26+ parameters.
• Docket ahead features monthly PCE data before the attention turns to Central Bank speak with Fed’s Williams, Daly & Hammack scheduled; the latter is set to explain her dissent. Prior to the meeting, Hammock had expressed some scepticism around easing with inflation showing signs of persistence.
• The yield curve continues to steepen though action is modest and a function of the short-end continuing to pull back from post-Fed highs, as opposed to any real long-end extension with the 10yr up to 4.55% at best and shy of Thursday’s 4.95% peak.
• Elsewhere, we remain attentive to any updates on the US shutdown as the deadline looms and Rep. are now working on their Plan C for funding. As it stands, there are multiple approaches Speaker Johnson could take and we are largely in wait-and-see mode until the Speaker or other key figures provide an update.

Bunds: +6 ticks, 133.97

• Similarly to USTs, yet to deviate lastingly from the unchanged mark but have printed a slightly more expansive 133.81 to 134.10 range.
• Came under pressure early doors on a much hotter than expected German PPI release. Though, the 133.81 session printed a short while after in choppy and thin trade.
• Docket ahead for the bloc is particularly light and as such direction will be sought from US data and Fed speak.

Gilts: -4 ticks, 92.38

• Opened higher by a single tick before slipping to a 92.18 trough and then paring back to unchanged. Since, action has been very limited and choppy in 92.18-48 parameters.
• Before the open, Retail Sales came in softer than expected but still posted a recovery from the prior. At the same time, PSNB came in below expectations for November and posted the lowest borrowing figure for three years.
• However, the OBR has stated that the figure equates to 113bln of borrowing YTD, while lower Y/Y this is 2bln above the profile consistent with the forecasts from October’s Autumn Budget, an overshoot which is primarily due to revisions from earlier in the year.
• Ahead, docket light with impetus likely to be drawn from Fed speak and US PCE.