EUROPEAN FIXED UPDATE: Gilts lag as UK wage data essentially removes any chance of a Dec. BoE cut ahead of CPI

USTs: -6 ticks, 109-21+

• In the red but only modestly so, moving in tandem with the morning’s data release out of the UK and Germany but in relatively thin 109-21 to 109-29+ parameters.


• Focus for the space is of course on Wednesday’s FOMC. Into this, yields are firmer across the curve which itself has a very slight flattening bias, in-fitting with action at this time on Monday.


• Docket ahead is light for the US aside from a 20yr tap, into which it remains to be seen if the modest pressure that is currently in place will increase and provide concession for the auction.


• Before that, Retail Sales will be scoured for insights into the Thanksgiving period, with various indications around the month pointing to a strong series and continued consumer resilience

Bunds: -2 ticks, 134.71

• Came under pressure on the morning’s UK wage data (see Gilts for details) with leads bearish in-fitting with contained/softer UST action overnight.


• However, this proved relatively short-lived as Bunds were sent back into positive territory to a 134.94 session high on Germany’s 13% Y/Y lower 2025 issuance intentions, and the mixed but ultimately softer German Ifo release.


• An Ifo release which saw the Business Climate and Expectations figure both fell shy of expectations and printed outside of the forecast range, though the bullish-impetus from the release was somewhat offset by a much better than forecast Current Conditions metric.


• Most recently, German ZEW saw a much better-than-expected Economic Sentiment outturn which sparked around 10 ticks of pressure, though this proved somewhat short-lived.

Gilts: -71 ticks, 93.28

• From the morning’s data, the wages components have taken centre stage with the hot metrics essentially removing any chance of easing on Thursday with just 1bps implied (c. 4bps pre-release. Though, we await CPI on Wednesday.


• A release which caused Gilts to gap lower by 47 ticks at the open and then slip further to an initial 93.27 trough. Since, as newsflow slows, we have bounced back towards opening levels of 93.52.


• While the wages were hawkish this morning, other components point to the labour market itself loosening a touch which may be a point of concern for the MPC ahead; however, the prior Payrolls figure was revised up which, alongside reliability issues, offsets the dovish implications of this component.


• Most recently, modest pressure was seen on the DMO’s 2029 Gilt tap which saw a softer cover than in the last outing; an auction which, alongside the slight bearish lead from Bunds post-ZEW, has sent Gilts to a new 93.26 trough.

17 Dec 2024 - 10:20- Fixed IncomeData- Source: Newsquawk