Weaker As UK Retail Sales and Cautious Schnabel Weigh

Core/semi-core EGBs are softer on the day, as firmer-than-expected UK retail sales and hawkish Fed-speak overnight continue to weigh on wider global core FI.

• Executive Board member Schnabel's prepared remarks were cautious, re-iterating that low Eurozone productivity may delay inflation returning to the 2% target, given upward pressure on unit labour costs.
• These comments counter rhetoric from Scicluna (open to rate cut in March) and Villeroy (risk of cutting too late at least equal to that of cutting too early).
• Bunds are -43 ticks at 133.18, current -27 lower on the week and within well-defined technical parameters. The Feb 14 low of 132.77 is the first support with 134.21 (20-day EMA) seen on the upside.
• The German and French cash curves have bear steepened a touch, while periphery spreads to Bunds are tighter owing to the uptick in European equities. The 10-year BTP/Bund spread, currently -0.8bps at 148.8bp, operates close to its tightest levels since March '22.
• Looking ahead, US PPI at 1330GMT/1430CET will garner cross-market interest.