EUROPEAN FIXED UPDATE: Powell props up benchmarks, ECB & US data next

USTs: +9+ ticks, 109-08

• Bid, eclipsed Wednesday’s 109-09 pre-FOMC peak by half a tick. In brief, the FOMC statement sparked a hawkish move given the removal of the line around inflation progress, causing USTs to hit a 108-22 session low; thereafter, the move pared as Powell clarified this was just a tightening of the statements language, not a signal.


• Following the meeting, market pricing looks for 48bps of easing across the remainder of 2025, which is essentially unchanged from pre-Fed. The implied timing of a first cut remains June (-25bps priced); on this, Rabobank has shifted their one 2025 cut forecast to June from March, assessing that Chair Powell looks to be in no rush to ease.


• Specifics for the fixed complex post-FOMC have been light but the bullish bias remains intact. As such, if we surpass the 109-09 top more convincingly then we look to 109-12 from Monday after which there is a bit of a gap until 110-00.


• Ahead, the docket is packed with earnings in focus (see Equities) alongside a number of US data prints. Weekly claims are seen at 220k while the continuing figure, which coincides with the BLS window, is forecast to once again print at 1.89mln. Today also sees the first advance read of Q4 GDP and quarterly PCE metrics before Friday’s monthly figures; reminder, desks generally look for Core PCE M/M to print in a 0.16-0.20% band.

Bunds: +40 ticks, 131.74

• Firmer, in-fitting with USTs directionally but in slight contrast are currently a few ticks shy of Wednesday’s pre-FOMC 131.81 peak. As it stands, action is seemingly a continuation of the post-Powell bullish move from Wednesday.


• For the bloc, specifics this morning include Flash GDP data which came in softer-than-expected but spurred no real reaction, following weaker than forecast German and Italian numbers; the German metrics were weighed on by export activity, which printed “significantly lower” Q/Q in the GDP series.


• Note, earlier in the morning the Q4 German Import Price figures were hotter-than-forecast. Metrics which, when taken with the poor growth performance, add to stagflationary concerns for Germany.


• Ahead, the main event is of course the ECB (preview available), a meeting which is expected to see a 25bps cut (-26bps currently implied). Focus for the meeting will be, among other points, on any indications of another discussion around 50bps, views on recent poor growth performance and whether potential Trump-tariffs factored into the deliberations and/or guidance.


• If we surpass the 131.81 peak then resistance features at the figure, 132.14, 132.15 and 132.33 in the near-term. While a move below the 131.26 trough encounters support at 131.07 before the figure and then 130.70 from early January.

Gilts: +23 ticks, 92.44

• Bid following the above.


• FOMC and European data aside, newsflow for the complex has featured December mortgage data which both lendings and approvals increase more than forecast and with upward revisions to November numbers.


• Elsewhere, Chancellor Reeves continues to do the media rounds taking up her growth plan from Wednesday’s session. The most pertinent line being she expects the economy to feel the benefit within the current Parliament, while this is a positive for Gilts and her fiscal position, it remains to be seen if it is realised.


• Technically, Gilts find themselves at a 92.50 peak. Stopping just shy of Wednesday’s 92.54 best. Resistance thereafter features at 92.68 from Monday. To the downside, 92.15 was the low on Monday before 92.00 and then 92.00 and then 91.96 from Tuesday and Wednesday respectively.

30 Jan 2025 - 10:15- Fixed IncomeData- Source: Newsquawk