EUROPEAN FIXED UPDATE: Two-way EGB action on prelim. inflation prints ahead of Germany's figure and US PCE

USTs: -2 ticks, 110-19

• A contained start to the final session of the week. Newsflow this morning has been virtually non-existent for USTs as we continue to digest the court-related trade updates and confirmation that Liberation Day measures will remain in place during the appeals process; timeline remains unknown.


• In a 110-19 to 110-25 band. A marginal new high for the week with USTs holding onto the gains that began mid-day on Thursday and then continued into the evening as the initial court-related pressure abated with the administration sticking to its plans.


• Ahead, the docket is headlined by PCE. Into which, there is just a 2% implied probability of a June FOMC cut, a 25bps move isn't priced until October (-32bps). Aprilʼs CPI and PPI data suggest core PCE inflation softened in April.


• Fed officials have been cautious on giving any outlook updates amid the uncertainty, but the influential Governor Waller has argued again that he does not see much from tariffs to suggest that inflation will rise persistently.


• After the data, we hear from 2027 voters Bostic and Daly before Trump speaks on the US Steel deal; reminder, Bostic has recently suggested that inflation expectations are troubling.

Bunds: -11 ticks, 131.09

• Initially contained, in-fitting with the above. Modest uptick to the 131.39 session high after cooler-than-expected Spanish Flash inflation, the series featured a marked cooling in the core figure.


• Thereafter, the early release of State CPI from Baden-Wurttemberg came in cooler than the mainland skew and immediately lifted Bunds by around 15 ticks back to the above high. However, as the remaining States hit in the minutes after, the overall picture is more mixed vs mainland; causing the move to retreat and then extend further down to a fresh 131.09 low.


• For the mainland, consensus is for a modest cooling across M/M and Y/Y metrics for both the headline and harmonised figure. As a reminder, the EZ Flash figure is just next week just before the June ECB, ahead of the gathering markets are within a bps of fully pricing a 25bps cut


• Ahead, aside from the mentioned inflation points, the EZ docket is light in hours during which time focus will be firmly on US PCE. Thereafter, attention turns to S&P on France, DBRS on Germany and Spain. From these, S&P on France is the one to watch as the outlook was revised to negative in February on deficit concerns.


• Into that, OATs trade in-line with Bunds, currently lower by a handful of ticks at the trough of a 124.56 to 124.83 band.

Gilts: +1 tick, 91.57

• Directionally in-fitting with the above but holding at the unchanged mark given the lack of UK specifics. Handful of BoE speakers over the last 24 hours though nothing that has fundamentally shifted the narrative.


• Gapped higher by 17 ticks before extending to a 91.79 peak, in-fitting with Bunds at the time as they reacted to Spanish inflation. Thereafter, Gilts have waned by a few ticks and are essentially back to yesterday’s close.


• Specifics for the UK have been very light, nothing of particular note on the docket so instead the benchmark will likely get dragged along by any move to German mainland CPI and then US PCE, in the absence of an unscheduled catalyst.

30 May 2025 - 09:55- Fixed IncomeData- Source: Newsquawk