EUROPEAN FIXED UPDATE: JGBs lag slightly on further BoJ reports, Gilts gapped higher on Retail Sales

USTs: +1 tick, 108-20

Modestly firmer, but yet to deviate significantly from the unchanged mark. Derived a modest bid from action across the pond as Gilts lifted on the back of soft Retail Sales metrics for December.
Experienced some modest choppiness amid the BoJ related source reports this morning (see JGBs). Otherwise, US news has been somewhat light as markets wind down into a long-weekend with Martin Luther King Jr. Day on Monday; however, the inauguration of Trump means Monday is unlikely to be a typical holiday session.
Today’s session features a handful of data points and the latest CBO Budget & Economic Outlook report, but is on paper at least set to be a lighter session than has been the case for the week thus far.
At a 108-22+ peak but with ranges narrow and the low at just 108-16+, if the move higher continues then Thursday’s WTD peak resides at 108-24 while if downside emerges, i.e. from the constructive tone, then there is support at 108-05 and 108-01 before the figure.
Yields are under modest pressure across the curve with action relatively broad based though there is a very slight flattening bias in play.

JGBs: U/C, 141.01

Once again the modest underperformer on the account of more sources pointing to a BoJ hike in January.
As it stands, it appears that a hike is all but cemented but is contingent on there not being a significant market move after Trump’s inauguration on Monday.
Market pricing currently implies a 80% chance of a hike next Friday; aside from Trump’s inauguration, Japanese CPI hits in the session before the policy announcement.

Bunds: +17 ticks, 131.73

Lifted at 07:00GMT on the UK data points (see Gilts for details), metrics which picked Bunds off their 131.50 base and helped lift them to a 131.88 session high over the course of the morning.
Specifics for the bloc have been light so far; however, we have numerous speakers on the docket shortly with Centeno, Cipollone, Escriva and Nagel scheduled.
The 131.88 peak is also a new high for the week with little by way of resistance until 132.13 from January 8th. To the downside, support resides at 131.30-33 and then the figure before 130.57 from Monday.

Gilts: +7 ticks, 91.49

Gapped higher at the open by 27 ticks and then extended further to a 91.89 peak. A move which was driven by soft Retail Sales for December, metrics which complete the week’s set of dovish UK data and cement the view that February is a live meeting with a strengthening market bias towards a cut occurring.
Note, market pricing didn’t really shift after the release from the c. 80% implied probability of a cut, with participants likely waiting for next week’s Flash PMIs, Trump’s inauguration and any fiscal update before beginning to cement their views.
The 91.89 peak marks a WTD high and has Gilts on track to close the week out with gains of c. 250 ticks from the 89.00 open and 88.96 WTD low just below that.
From a yield perspective, the UK 10yr is back down to 4.65% which is a much more comfortable level for the Chancellor; however, Reeves will be attentive to any inflationary implications from Trump’s inauguration and initial actions/comments, in case that spurs a rise in global yields