EUROPEAN FIXED UPDATE: Relatively contained start to the week, EGBs lag slightly into supply

USTs: +2 ticks, 111-18

• A contained start to a week that includes the April jobs report. Newsflow on the tariff/trade front included indications of a potential path to a US-China agreement, however, specifics have been light with major catalysts ex-geopols a touch light.


• Amidst this, USTs find themselves in a thin 111-15 to 111-22+ band. The peak matches Friday’s best with resistance thereafter at 112-01 from early-March. On the flip side, support is firstly at Friday’s 111-01+ base before a gap until 110-20+ and 110-18+ from the preceding two sessions.


• Ahead, the docket is focussed on the Dallas Fed Manufacturing Business Index before the Treasury Financing Estimates ahead of Wednesday’s Quarterly Refunding where desks widely expect auction sizes to be unchanged for notes, bonds and FRNs, and a reiteration of the Treasuries view that the current issuance sizes are sufficient to fund near-term borrowing requirements.

Bunds: -25 ticks, 131.34

• In-fitting with USTs and as such are also in a relatively modest 131.32 to 131.76 band. Developments for the bloc, ex-earnings, have been light. The slight underperformance seen in EGBs vs USTs/Gilts is likely a function of some concession into upcoming EZ supply where over EUR 5bln is expected to be sold across three lines.


• That aside, the main updates have been from/about the ECB. Over the weekend and already this morning numerous officials have spoken though none have significantly altered the narrative, with the more interesting update coming from sources; a Reuters report that officials are increasingly confident on a June move, though there is little/no appetite for a big move.


• Despite this, markets are yet to fully price in a 25bps cut in June with only around a 75% chance of a move currently implied. Obviously, there are still several weeks before then and the potential for numerous narrative-altering updates to occur. But, nonetheless, as it stands the path of least resistance for ECB pricing is in a dovish direction.


• Given this, resistance for Bunds factors at 131.93, 94 and 132.01 from last week before 132.56, 71 and 80 from early-March/late-February. For yields, the German 10yr is holding just under 2.50% vs the April 2.43% base and the 2.31% YTD trough thereafter.

Gilts: -7 ticks, 93.08

• Essentially unchanged in a very narrow 93.10 to 93.33 band. As above, updates light as we await further details on the meeting between US Treasury Secretary Bessent and BoE Governor Bailey, a discussion on regulation and financial markets which was reported as being “good”.


• Elsewhere, attention turns to domestic matters as local elections get underway this week and are the first full litmus test for the Labour party since the election. While not necessarily a big driver for GBP and/or Gilts in the immediacy, the results could have some influence on Starmer’s Cabinet composition and/or policy approach.


• Additionally, participants will be looking to see how the Conservatives and Reform fare, as a strong showing by Farage-led Reform could see renewed talk of a tie-up into the 2029 election to try and thwart Labour. Though of course such electioneering is many years away.

28 Apr 2025 - 10:00- Fixed IncomeEU Research- Source: Newsquawk