EUROPEAN FIXED UPDATE: Gilts lead after cooler CPI and now await the Spring Statement

Gilts: +22 ticks, 91.22

• A firmer start to a packed day with Gilts gapping higher by 33 ticks at the open after an almost entirely cooler-than-expected inflation series. A series which has sparked a modest dovish move in BoE pricing, though the overall narrative hasn’t shifted.


• As a reminder, desks generally look for inflation to pick up in the months ahead and there does not appear to be anything in today’s release to suggest otherwise.


• Specifically, Gilts opened at the 91.35 mark before extending to a 91.58 peak. However, this proved short lived with the benchmark retreating to just below opening levels ahead of the Spring Statement from 12:30GMT, full Newsquawk preview available.


• For the Spring Statement, today’s inflation data is theoretically welcome but won’t have an impact given the OBR assessment window closed several weeks ago. For today, the Chancellor is expected to try and raise/save GBP 17bln, to plug the fiscal hole she finds herself in and then to provide headroom of just under the GBP 9.9bln she had in October.


• From the DMO, they are expected to announce a Gilt remit of around the GBP 303-305bln mark vs the current 297bln projection. Within this, the skew is expected towards the middle of the curve with a notable movement from longs given recent DMO commentary and pension demand reportedly shifting - breakdown available in the preview.


• In terms of levels, to the upside 91.91, 92.18, 92.48/49 and 93.01. To the downside, 90.71, 89.59 and then the 89.23 contract low; a low which printed when the 10yr yield hit 4.925%.

Bunds: +8 ticks, 128.21

• Modestly firmer after picking up early doors alongside the UK CPI print. Thereafter, continued to gradually climb to a 128.36 session high, which is a tick above Tuesday’s best but shy of Monday’s 128.46 peak.


• The continued bid this morning came as the risk tone soured after a constructive open. There does not appear to be one specific driver behind the pullback in equity sentiment and accompanying upside in Bunds, with it worth highlighting that despite the tone remaining downbeat EGBs are now fading from highs and are back to near-unchanged.


• For Bunds, this leaves them around 128.20 into near-term supply which may be influencing and sparking some of the recent marginally bearish action. Once again, the German sale should be well received given the significant cheapening of the benchmark vs peers.


• Ahead, the docket is focussed on events in the UK and US.

USTs: -5 ticks, 110-19+

• In the red as US equity futures have remained relatively steady throughout the morning and while they are softer, it is only marginal. Amidst this, USTs find themselves at the midpoint of a very slim 110-16+ to 110.23 band.


• The US docket is packed. Firstly, we await any fresh developments to the tariff situation after Trump’s language yesterday and reporting at the time and since. Secondly, further details on the Politico report that Trump wants a debt limit increase in his tax bill. Thirdly, Trump guiding us to another business update today. Finally, Fed speak and US Durables data.


• Elsewhere, we get another auction with 70bln of 5yr Notes due and following the 2yr tap on Tuesday which was strong when compared to recent averages though not quite as well received as the outing in February.


• In brief, overnight Fed speak saw Goolsbee state that it may take longer than anticipated for the next cut to come because of economic uncertainty. Amidst this, the President reiterated his call for lower rates and said the price of goods has been easing.

26 Mar 2025 - 10:05- ForexEU Research- Source: Newsquawk