EGBS: Bund Futures Pierce Monday's High, Following USTs Higher
Feb-05 10:28
Bund futures have pierced Monday’s high, currently +47 ticks at 133.59. Regional data/speakers have not been market moving, with major EGB futures following USTs higher through the session.
- Today’s rally in Bunds exposes 133.73 (50.0% retracement of the Dec 2 - Jan 14 bear leg) and 133.86 (Jan 2 high) on the upside.
- The German curve has bull flattened, with 30-year yields ~4.5bps lower today.
- 10-year EGB spreads are within 0.5bps of yesterday’s closing levels. French PM Bayrou is expected to survive two censure motions later this afternoon.
- Eurozone January services/composite PMIs were broadly in line with flash prints, while December PPI was close to consensus.
- The ECB wage tracker was little changed compared to the December release, still pointing to a deceleration of wage growth this year.
- ECB Vice President de Guindos played down the role of the neutral rate in setting near-term policy an interview. This comes ahead of an ECB staff report on the concept on Friday.
- Global focus turns to the US Quarterly Refunding Announcement at 1330GMT/1430CET, with US services sentiment data also due this afternoon.
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UK DATA: Final Dec PMI Confirms Deeper Job Cuts But Accelerating Inflation
Jan-06 10:28
- The UK services PMI was revised three tenths lower to 51.1 in the final December release (51.4 prelim), leaving a very mild bounce from the 50.8 in Nov.
- The tepid recovery is in contrast to the stronger relative rebound in the Eurozone PMIs this morning.
- The flash release had indicated as such but this final release notes three consecutive monthly declines in staffing numbers for service providers, with December seeing its sharpest drop since Jan 2021. 23% of respondents reported a decline vs 12% signalling a rise. “Service providers widely commented on hiring freezes and the non-replacement of leavers due to rising payroll costs.”
- “Constrained recruitment plans, tight budget setting among clients, and worries about the broader UK economic outlook all contributed to subdued business optimism in December. The degree of positive sentiment was the joint-lowest for two years (equalling that seen in November).”
- The composite PMI meanwhile was revised a tenth lower to 50.4 in the final December release, also pushing it a tenth below the 50.5 in Nov for its lowest since Oct 2023. It implies close to zero real GDP growth.
- However, overall cost inflation increased by its most since April which led to a robust and accelerated rise in prices charged, with the latter led by services inflation hitting a six-month high to remain “well above the pre-pandemic average”.
EURIBOR: Put fly seller
Jan-06 10:19
ERH5 97.62/97.50/97.37p fly sold at 3 in 4k.
US TSY FLOWS: Block trade
Jan-06 10:16
10yr Block trade suggest buyer:
- TYH5 5k at 108.15.
