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BONDS: Core Global FI Pressured By Data & Supply, EGBs Tighten To Bunds

BONDS
BulletMarketsFixed Income Bullets

Core global FI markets have sold off this morning.

  • Firmer-than-expected Hesse CPI data out of Germany (based on comparisons with the national CPI expectations) drove further hawkish repricing on the ECB-dated OIS strip and some weakness in bonds.
  • ~100bp of ECB cuts now priced through ’25 vs. 115-120bp seen just before the Christmas break.
  • Issuance-related pressure also noted ahead of the data, with EUR & GBP supply swelling, expectations for a brisk start for $IG ’25 issuance noted and Tsy coupon supply due over the next three days (as well as the risk of EGB syndication announcements).
  • Bund futures -31 at 132.33, lows of 132.22 printed.
  • Initial support at 132.00 untested.
  • German yields 1-4bp higher, curve flattens. 2s10s 24.6bp, just over 5bp off December highs.
  • EGB spreads to Bunds tighter given the Hesse CPI, equity rally and stronger-than-expected peripheral & French services PMIs.
  • BTPs and OATs the outperformers, narrowing by ~2bp vs. Bunds.
  • 10-Year gilts little changed vs. Bunds, spread ~216bp after trading either side of 220bp over the holiday period.
  • Benchmark UK yields 1-2bp higher, cross-market inputs continue to dominate.
  • Gilt futures -26 at 91.97, off lows of 91.78. Initial support at the Dec 19 low/bear trigger (91.64) untested.
  • SONIA futures +0.5 to -2.0. BoE-dated OIS pricing 56bp of cuts through ’25, 1.5bp less dovish on the day.
  • German national CPI data due this afternoon.
  • Final U.S. services PMI and durable goods data also due later today, as is factory orders.
  • Elsewhere, Fed Governor Cook will speak.
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Core global FI markets have sold off this morning.

  • Firmer-than-expected Hesse CPI data out of Germany (based on comparisons with the national CPI expectations) drove further hawkish repricing on the ECB-dated OIS strip and some weakness in bonds.
  • ~100bp of ECB cuts now priced through ’25 vs. 115-120bp seen just before the Christmas break.
  • Issuance-related pressure also noted ahead of the data, with EUR & GBP supply swelling, expectations for a brisk start for $IG ’25 issuance noted and Tsy coupon supply due over the next three days (as well as the risk of EGB syndication announcements).
  • Bund futures -31 at 132.33, lows of 132.22 printed.
  • Initial support at 132.00 untested.
  • German yields 1-4bp higher, curve flattens. 2s10s 24.6bp, just over 5bp off December highs.
  • EGB spreads to Bunds tighter given the Hesse CPI, equity rally and stronger-than-expected peripheral & French services PMIs.
  • BTPs and OATs the outperformers, narrowing by ~2bp vs. Bunds.
  • 10-Year gilts little changed vs. Bunds, spread ~216bp after trading either side of 220bp over the holiday period.
  • Benchmark UK yields 1-2bp higher, cross-market inputs continue to dominate.
  • Gilt futures -26 at 91.97, off lows of 91.78. Initial support at the Dec 19 low/bear trigger (91.64) untested.
  • SONIA futures +0.5 to -2.0. BoE-dated OIS pricing 56bp of cuts through ’25, 1.5bp less dovish on the day.
  • German national CPI data due this afternoon.
  • Final U.S. services PMI and durable goods data also due later today, as is factory orders.
  • Elsewhere, Fed Governor Cook will speak.