BONDS: Off Lows, Supply Caps Recovery, Bearish Techs Intact

A narrow session for core global FI markets, with TY, Bund & gilt futures all trading above yesterday’s lows.

• Continued heavy IG supply limits any recoveries at this stage.
• The initial EGB syndications of ’25 have generated strong demand.
• Little reaction to fresh multi-month highs in crude futures.
• Bearish technicals intact.
• Bund futures flat around 132.00, German yields -0.5bp to +0.5bp, light steepening.
• EGB spreads to Bunds -2bp to +0.5bp.
• European equity rally promotes some outperformance for the likes of GGBs and BTPs.
• GGBs continue early ’25 outperformance, aided by fiscal/ratings trajectory and the PDMA’s conservative ’25 issuance target. Spread to Bunds further below 75bp, on track for another cycle closing low.
• BTPs have tightened by ~1.5bp vs. Bunds, aided by solid demand at today’s syndication (orderbooks have hit a record level for a dual tranche offering). Spread to Bunds nearing 110bp, a level not closed below since December 11.
• PGBs the laggard this morning, perhaps driven by expectations for a PGB syndication announcement.
• Gilts saw some light concession into this morning’s ’30 gilt auction, although have stabilised since, aided by solid enough demand (which was notable given the bearish backdrop).
• Futures last little changed at ~91.40. Yields little changed across the curve.
• ECB & BoE pricing little changed on the day, showing 102bp and 55.5bp of cuts through ’25, respectively.
• U.S. ADP employment and weekly jobless claims data due later.
• Comments from Fed’s Waller & ECB’s Villeroy also scheduled.
• Bund supply due shortly, with U.S. 30-Year supply on deck later.