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BONDS: EGBs-GILTS CASH CLOSE: Bunds Outperform As Fiscal Uncertainty Lingers

BONDS
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Core European curves twist steepened Monday, with short-end instruments strengthening to start the week.

  • Bunds largely held on to morning gains triggered by a broader risk-off move, as US economic concerns lingered, while uncertainty over German fiscal negotiations remained a prominent theme (Bunds jumped after the Green Party said they wouldn't support the current fiscal expansion proposal).
  • UK instruments benefited too but traded with little clear direction through most of the session, sagging toward the cash close.
  • Even so, central bank easing expectations were little changed (end-2025 ECB steady at 44bp of further cuts, BOE 57bp, up by 1bp).
  • In data, German industrial production was a little stronger than expected while the trade surplus slipped  in January, but this wasn't a market mover.
  • Bunds outperformed Gilts on the day. Periphery / semi-core EGB spreads were mixed, with Spain outperforming and Italy underperforming.
  • Tuesday's calendar is relatively thin (Dutch final Feb inflation, ECB Rehn speech), with more attention on events later in the week including the ECB conference and US CPI data on Wednesday.

Closing Yields / 10-Yr EGB Spreads To Germany

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Core European curves twist steepened Monday, with short-end instruments strengthening to start the week.

  • Bunds largely held on to morning gains triggered by a broader risk-off move, as US economic concerns lingered, while uncertainty over German fiscal negotiations remained a prominent theme (Bunds jumped after the Green Party said they wouldn't support the current fiscal expansion proposal).
  • UK instruments benefited too but traded with little clear direction through most of the session, sagging toward the cash close.
  • Even so, central bank easing expectations were little changed (end-2025 ECB steady at 44bp of further cuts, BOE 57bp, up by 1bp).
  • In data, German industrial production was a little stronger than expected while the trade surplus slipped  in January, but this wasn't a market mover.
  • Bunds outperformed Gilts on the day. Periphery / semi-core EGB spreads were mixed, with Spain outperforming and Italy underperforming.
  • Tuesday's calendar is relatively thin (Dutch final Feb inflation, ECB Rehn speech), with more attention on events later in the week including the ECB conference and US CPI data on Wednesday.

Closing Yields / 10-Yr EGB Spreads To Germany

Keep reading...Show less