Early Rally Fades, With Focus On Data

Core FI has strengthened in Tuesday's early European trade, led by EGBs, as French inflation came in line with expectations (vs Spain's upside surprise yesterday).

• Bunds continue to outperform Treasuries and Gilts, though are well off session highs and trading within Monday's ranges with Month-end today, and the FOMC, ECB and BoE decisions looming later in the week.
• Morning data - which in addition to French CPI included a weak Eurozone bank lending survey, and poor German/French consumer numbers - did little to lessen Eurozone market rate hike pricing though. 50bp is 99% priced in for the ECB Thursday, and a further 45bp in March (highest since the start of the year).
• Attention turns to US data later in the session, with the 4Q Employment Cost Index potentially impacting the messaging at Wednesday's FOMC given the Fed's increasing focus on job market tightness.
• We also get the Jan MNI Chicago Business Barometer and Jan Consumer Confidence, and US house price data.

Latest levels:

• Mar 10-Yr US Tsy futures (TY) up 5.5/32 at 114-14.5 (L: 114-09.5 / H: 114-19)
• Mar Bund futures (RX) up 13 ticks at 136.83 (L: 136.54 / H: 137.3)
• Mar Gilt futures (G) up 6 ticks at 104.64 (L: 104.37 / H: 105.08)
• Italy / German 10-Yr spread 0.2bps tighter at 187.9bps