EUROPEAN FIXED UPDATE: Bid after Trump's latest on tariffs & tech pressure, though benchmarks are off highs

USTs: +7 ticks, 110-27

• Bid, benefitting from the marked equity sell-off seen in the second half of Thursday’s US session which reverberated into APAC trade and the European open; driven by losses in Tech and Trump confirming that the 10% measure on China is in addition to the 10% tariff he had already announced.


• Action that took USTs to a 111-03+ peak in APAC trade which is a YTD high for the June contract and takes us back to the 111-08 and 111-20+ peaks from November and December respectively.


• Today’s session is, barring anything fresh on tariffs from Trump or his cabinet, headlined by January's PCE numbers. Figures which are expected at 0.3% M/M (prev. 0.3%) and 0.3% M/M (prev. 0.2%) for the headline and core rates respectively. Expectations which followed the CPI and PPI releases, which were hot, however the PCE-relevant internals were net-softer. More recently, following Thursday’s upward revision to Q4 PCE as part of the GDP series some desks have suggested this could point to an upward revision to the prior.


• Into this, US yields are softer across the curve with the belly once again marginally leading the downside. Focus on the US 10yr yield as it pivots the 4.25% mark while further out the 30yr is getting close to 4.50% to the downside.


• Note, USTs have been gradually dipping from highs throughout the European morning as risk sentiment in the region picks up and US futures begin to make a very marginal recovery from overnight lows.

Bunds: +30 ticks, 133.19

• Trading in tandem with USTs for the first part of the session but has since experienced a marginal pullback from highs and while still comfortably in the green, the benchmark finds itself in the lower-half of a 132.94-133.46 band.


• A pullback which has occurred despite the cooler-than-expected French preliminary inflation measures and the broadly in-line, when compared to expectations for the nationwide figure, German State CPIs; though, while expected, the M/M German figures did see a marked move higher which may be weighing on EGBs. Furthermore, the latest ECB SCE saw 12-month inflation expectations ease to 2.6% (prev. 2.8%) while the three-year figure was steady at 2.4%.


• Instead, the move appears to have been primarily driven by sentiment in Europe lifting off lows, with some of the region's equity futures inching marginally back into the green.


• German data aside, the bloc’s docket ahead is headline by rating updates on Germany and France by Fitch and S&P respectively; while it may be too soon for a full assessment on Germany, given coalition talks have only just begun, it will be interesting to see if the blocking minority in parliament weighs on Fitch’s assessment of the nation, given its implications for debt brake reform.

Gilts: +33 ticks, 93.31

• Following the above. UK specifics include Nationwide House Price figures which lifted from the prior and showed the sixth consecutive monthly gain.


• Alongside that, an extensive text release from BoE’s Ramsden in which he noted that uncertainty has increased and as such a data-dependent and meeting-by-meeting approach is warranted. In terms of future easing, or descending the Table Mountain, Ramsden pointed out that the descent could be slower or quicker than expected depending on circumstances/conditions.


• Firmer but at the lower-end of 93.24 to 93.48 parameters. A further pullback brings into view the figure and then the 92.22 base from earlier in the week. While a pickup would first encounter resistance at 93.49 from mid-February and then the current WTD peak of 93.51.


• Docket ahead is light and likely to be dominated by events in the US.

28 Feb 2025 - 09:55- ForexData- Source: Newsquawk