EUROPEAN FIXED UPDATE: EGBs near unchanged while USTs wane from Friday’s best

Analysis details (10:00)

• Core benchmarks are essentially unchanged at the time of writing, and reside towards the mid-point of circa. 40 tick parameters in EGBs. Specifics for the complex have been light in European hours with soft German Import/Export data meriting only a modest and quickly faded move higher in EGBs to the current 133.44 high. A peak that is just shy of Friday’s 133.53 peak, with a handful of interim points before the 134.00 mark but nothing of note until the 134.29 July 19th high.


• Action which comes ahead of a handful of ECB speakers though a text release from Lagarde at 14:00GMT is the only real official of note. However, we did receive unscheduled remarks from VP de Guindos who said the recent inflation print was good and a “positive surprise”; though, he did not go as far as Villeroy on Friday who, post-data, said that absent any shock(s) rate hikes are over.


• Continuing with Friday, the speech from Chair Powell was sufficient in trimming dovish market expectations for a handful of minutes but thereafter dovish price action continued as participants focused on the conditionality within his statement, with five cuts now priced for 2024. As it stands, USTs are currently around 12 ticks shy of Friday’s 110.28 peak and are a touch softer on the session as yields, particularly at the short-end, lift and pause for breath after recent marked pressure. Reminder, the FOMC is now in its blackout period going into the December gathering. Prior to that, a handful of key data points including Friday’s jobs report are due while today’s docket is headlined by October’s Factory Orders.


• Elsewhere, Gilts are ever so slightly underperforming vs EGBs with market pricing for the BoE, relatively speaking, much less dovish than that seen in the ECB and Fed; currently, circa. 75bp of cuts is implied for 2024 compared with 100/125bp from the ECB/Fed. For the week ahead, Friday’s inflation survey from the BoE will draw focus before next week’s policy announcement. Currently, Gilts languish towards the low-end of 96.47-96.93 parameters having given back around half of Friday’s upside.

04 Dec 2023 - 10:00- Research Sheet- Source: Newsquawk