U.S. Data Now Eyed, Moves Pare Back From Extremes

Tsys and Bunds hold shy of best levels after European inflation data provided the highlights in pre-NY trade, although benchmark futures have edged away from session lows in more recent trade.

• European market-based measures of inflation expectations, namely EUR 5y5y, bounce off worst levels with upticks in crude oil and TTF natural gas futures helping there.
• Still, the softer-than-expected run of Eurozone inflation data leaves a 25bp cut fully priced into the OIS strip come the end of the ECB’s Apr ’24 meeting, underpinning the front end of EGB curves.
• ECB dove Panetta characteristically warned against the risks of forcing needless damage on the economy via monetary policy settings, although stressed that policy settings will remain restrictive for as long as is required.
• Tsys twist steepen and German paper bull steepens.
• Gilts generally remain wider vs. peers on the day, although some of that move has been trimmed, with overt UK-specific drivers remaining sparse.
• Participants eye PCE and weekly jobless claims data out of the U.S., due at the bottom of the hour.