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EGBS: Outperform Gilts and USTs Following Trump Reciprocal Tariff Threat

EGBS
BulletEurozoneFixed Income BulletsMarkets

Major EGB futures have seen a more pronounced bid compared to Gilts and USTs following US President Trump’s Truth Social post on reciprocal tariffs, with tariff-related growth risks supportive of a more aggressive ECB easing cycle. 

  • Bund futures now +58 ticks at 132.73, fully retracing yesterday’s US CPI-induced selloff. Firm resistance is not seen till the 50-day EMA at 133.00.
  • The 10-year BTP/Bund spread troughed at ~105.5bps before widening on Trump’s post, now back above the 106bps level.
  • OATs continue to outperform EGB peers, with futures +78 ticks at 124.14. French PM Bayrou survived another no-confidence vote yesterday (the fifth of his tenure), after he pushed his social security bill through the National Assembly using Article 49.3 (as he did with the 2025 budget bill).
  • Short OAT positioning (per our most recent MNI Pi publication) may also be factoring into the outperformance.
  • The 10-year OAT/Bund spread is 3bps tighter at 73bps. A BBG benchmark changed mechanically lifted the spread to ~77bps earlier this week.
  • ECB-dated OIS price 80bps of easing through year-end, up from ~76.5bps earlier this morning.
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Major EGB futures have seen a more pronounced bid compared to Gilts and USTs following US President Trump’s Truth Social post on reciprocal tariffs, with tariff-related growth risks supportive of a more aggressive ECB easing cycle. 

  • Bund futures now +58 ticks at 132.73, fully retracing yesterday’s US CPI-induced selloff. Firm resistance is not seen till the 50-day EMA at 133.00.
  • The 10-year BTP/Bund spread troughed at ~105.5bps before widening on Trump’s post, now back above the 106bps level.
  • OATs continue to outperform EGB peers, with futures +78 ticks at 124.14. French PM Bayrou survived another no-confidence vote yesterday (the fifth of his tenure), after he pushed his social security bill through the National Assembly using Article 49.3 (as he did with the 2025 budget bill).
  • Short OAT positioning (per our most recent MNI Pi publication) may also be factoring into the outperformance.
  • The 10-year OAT/Bund spread is 3bps tighter at 73bps. A BBG benchmark changed mechanically lifted the spread to ~77bps earlier this week.
  • ECB-dated OIS price 80bps of easing through year-end, up from ~76.5bps earlier this morning.