EUROPEAN FIXED UPDATE: Core debt downbeat following UK and German data, Fed’s Williams looms

Analysis details (10:50)

• Gilts took the driving seat, initially at least, after a fairly contained APAC session given the lack of US participants/trade on Monday and with overall action relatively rangebound. On the Gilt open, the benchmark succumbed to the session's 103.37 low in short order as it reacted to earlier domestic jobs data and in particular the above-expected increase in the earnings metrics. A report which has seen BoE pricing for a 50bp February hike increase to a 75% probability vs circa. 63% pre-release. The 103.37 trough is incrementally below Monday’s 103.43 low and brings the January 11th base at 102.19 into view if a move below 103.00 and interim resistance around 10 ticks above the figure takes place.


• Post-UK, attention turned firmly to the German ZEW release which saw a significant and much greater than expected improvement in the Economic Sentiment figure to +16.9 from -23.3 and the expected -15.0%. Upside which was attributed to the more favourable energy market situation and in particular the German govt’s energy price caps. In an immediate reaction to the release, the Bund slipped to 137.79 from around 137.91 pre-release; note, this move was not sufficient to re-test the 137.66 low which printed in wake of the aforementioned UK jobs data. A trough which is circa. 10 ticks above Monday’s low, with someway still to go before last week's 136.04 base.


• Elsewhere, the morning’s supply docket featured new lines for the UK and Germany, with the UK outing well received and printing a strong cover while the German sale was unremarkable and prompted little reaction, with the accompanying cover coming in towards the mid-point of recent Bobl sales. Separately, Greece is reportedly coming to market with a new 10yr, via Reuters citing sources; thus far, this has seen demand in excess of EUR 17bln with guidance tightening slightly throughout the morning to MS +170bp, at the most recent update.


• Stateside, USTs have been moving in tandem with their European peers. Currently, USTs are lower by a handful of ticks towards the lower-end of a 114.15-114.29+ range, as the complex awaits data from the NY Fed and thereafter commentary from the region's Fed Governor Williams who is due to speak on "An Economy that works for All, moving towards Equitable Growth".

17 Jan 2023 - 10:45- Fixed IncomeEU Research- Source: Newsquawk