Rally stalled by strong European PMI data

Core fixed income had been on a relentless march higher, although the slightly better than expected French flash PMI followed by the much better than German flash PMI has seen bonds retreat from their highs.

• Both the French and German PMI surveys were largely compiled before lockdowns were extended, so can both be taken with a pinch of salt. The French PMI showed the first stabilization in new orders for 60months, new export orders at their fastest rate for 3 years, additional hiring of staff and a strong outlook for year ahead. The German PMIs were also upbeat but note that factory prices increased at a record pace (since the series began in September 2002). The pan-Eurozone PMIs were more in line with the French numbers but did show manufacturing growth at the fastest pace since data began in 1997, with services still contracting, but at the slowest pace since the pandemic began.
• There is still a fairly heavy data calendar to look forward to with flash PMI prints from the UK and US and durable goods in the US the highlights. There is another busy day of central bank speakers scheduled, too.
• TY1 futures are up 0-5 today at 132-02+ with 10y UST yields down -0.7bp at 1.615% and 2y yields down -0.3bp at 0.146%.
• Bund futures are up 0.30 today at 172.22 with 10y Bund yields down -1.8bp at -0.361% and Schatz yields down -0.1bp at -0.717%.
• Gilt futures are up 0.29 today at 128.58 with 10y yields down -2.2bp at 0.739% and 2y yields down -0.2bp at 0.038%.