EUROPEAN FIXED UPDATES: Benchmarks bearish overall amid supply, inflation updates & German fiscal developments

USTs: +2 ticks, 110-29

• A contained start to the session with the benchmark in a relatively narrow 110-26+ to 111-02+ band. Specifics were light in the European morning for Treasuries with participants very much digesting the extensive tariff and geopolitical updates from the tail-end of Tuesday’s session and overnight.


• Amidst all of the tariff and geopolitical updates, USTs attempted to move higher but ultimately were fairly choppy as they did and we continue to look for any other changes to the tariff narrative and/or for Putin to respond to the ceasefire proposal.


• Also influencing action, and potentially preventing USTs from making any real headway into the green, was the presence of supply with Tuesday’s 3yr which tailed, though was at the time overshadowed by tariff updates. Today, USD 39bln worth of 10yr notes due.


• Furthermore, the relatively rangebound action may also have been a function of participants looking ahead to the February CPI figure (12:30GMT, given the shortened LDN-NY differential). A series which is expected to print at 0.3% for both the headline and core M/M vs 0.5% and 0.4% respectively, metrics which follow somewhat hawkish price proxies in recent sessions and comes ahead of PPI on Thursday. All of which will factor into PCE on March 28th.

Bunds: -27 ticks, 126.80

• Softer, in a 126.69-127.14 band and by extension clear of Tuesday’s 126.53 base. Modest pressure which comes as the benchmark digests the inflationary implications of the EU tariff countermeasures on Trump’s metal tariffs. While this is arguably bullish for Bunds (lower growth, more ECB cuts), direction has primarily been bearish given the inflation implications.


• In addition to that, looming supply from Germany weighs with EUR 4.5bln of 2035 Bunds due. Furthermore, we are still counting down to Thursday’s Bundestag session to discuss Merz’s fiscal reform.


• On that, and also potentially weighing on Bunds, Handelsblatt has reported remarks from CDU’s Kiesewetter which indicate an openness to define ‘defence’, in the context of fiscal reform, in a way which would be in-fitting with the proposal from the Greens; furthermore, SPD’s Stegner also voiced support, saying an expanded definition “makes perfect sense”.


• Ahead, aside from supply and updates on the above and US data, we await the ECB’s latest wage tracker and comments from Nagel and Lane (slide release); remarks from Lagarde and peers haven’t added too much this morning, with the President saying that they cannot provide forward guidance while Simukus has said a cut or pause will be determined in April.

Gilts: -10 ticks, 91.80

• Once again, another session of essentially non-existent UK specific newsflow. Though, the region is attentive to US tariffs and the EU’s response, and perhaps more pertinently how Trump will in-turn respond, as it serves as a potential preview into how UK-US relations may develop; as a reminder, the Starmer-Trump meeting was regarded as having gone reasonably well.


• The benchmark is lower in-fitting with Bunds but with overall action relatively contained thus far. Spent the morning at the mid-point of a 91.66-91.90 band which is a marginal new WTD trough, bringing into view support at 91.56 from last Wednesday.


• More recently, the DMO’s 2035 auction was strong but saw a sub 3x cover alongside modest tails, results which weighed on Gilts by around 10 ticks but they remain within earlier session ranges.

12 Mar 2025 - 10:20- ForexGeopolitical- Source: Newsquawk