EUROPEAN FIXED UPDATE: Softer, pulling back from recent haven gains. Speakers and supply ahead

USTs: -8 ticks, 109-19

• A softer start for benchmarks as they continue to unwind Tuesday’s Russia-driven haven bid, taking USTs below Tuesday’s 109-19 base but still over 10 ticks clear of Monday’s 109-04+ low.


• Specifics for USTs are somewhat limited thus far, as we await Fed speak, 20yr supply and then Nvidia earnings after the cash equity close. Benchmark largely unreactive to UK data or most recently EZ negotiated wages.


• As mentioned, Fed speakers ahead with voters Barr, Bowman & Cook due before 2025 voter Collins; of the above, Collins has spoken most recently remarking last Friday that there is no preset path, the economy is in a “very good place” and she will not take December easing off the table.


• US yields are currently firmer across the curve, with the long-end leading slightly and the curve steepening a touch but comfortably within recent levels.

Bunds: -25 ticks, 132.08

• Directionally in-fitting with the above, magnitudes slightly more contained though into the region's latest wage data which sparked some modest pressure in benchmarks as the Q3 figure jumped to 5.42% from 3.54%.


• However, the move was well within earlier bounds and pared almost immediately as it doesn't change the narrative of ECB easing in December, though it does factor in favour of those looking for a 25bps move vs a larger 50bps one; market pricing currently 78% and 22% probabilities respectively.


• Holding in 131.89 to 132.35 parameters, aside from the above specifics have been light with ECB’s de Guindos not adding much while Escriva was focused entirely on domestic matters.


• Ahead, ECB President Lagarde is scheduled though on financial stability and we do not expect a text while Germany is set to auction its final long bonds for the year, a tap which should be well received.


• Note, there was no sustained reaction to the morning’s UK data, with the docket sparse otherwise.

Gilts: -66 ticks, 93.48

• Gapped lower by 48 ticks and then slipped another 23 to a 93.44 trough after hotter than expected inflation data for October. A release which has further reduced the odds of a December cut, currently at ~15% vs ~22% pre-release.


• However, it is worth caveating that while the key Services Y/Y figure lifted to 5%, surpassing market consensus for 4.9%, it matched the BoE’s own forecast for the month and thus won’t serve as a surprise for monetary officials.


• Furthermore, ING calculates that the core-services figure cooled to 4.5% from 4.8%, which is a very different story to the official data. Finally, before any final determination can be made on December’s meeting, we will receive the November series in the session before the policy announcement.


• Ahead, BoE’s Ramsden due and scheduled to speak on monetary policy. Ramsden is a dove and in June dissented against, alongside Dhingra, the decision to leave rates unchanged. Ramsden’s recent remarks have largely focussed on the Gilt market and auctions.

20 Nov 2024 - 10:20- Fixed IncomeEU Research- Source: Newsquawk