FRANCE DATA: France PPI Y/Y Remains Negative Though Highest Since Dec'23

• The Risk On tone is starting to take hold, with Europe starting to get dragged by the US.
• US Treasuries are seeing some similar unwind, with further selling interest pushing Futures to their respective lows, nothing fast but still some early notable volumes in the US.
• Immediate target in Bund is at 131.33, Yesterday's opening Gap.

• The ECB's Q4 Bank Lending Survey saw tightening in credit standards generally due to "higher perceived risks" and "banks' lower risk tolerance" (particularly in Germany and Italy for firms). It also saw a general pick up in demand for loans mainly due to "declining interest rates".
• In particular, credit standards for firms tightened (reported by a net balance of 7% of banks) from unchanged in Q3 and the press release notes that this is the "most pronounced tightening seen since Q3 2023". This tightening is expected to continue further in Q1-25 (a net balance of 10% of banks expect further net tightening of credit standards for firms). If we see this outturn, this would be above the historical average of 9%.
• There was further tightening in consumer credit standards of in Q4 (net balance of 6% in Q4 vs 6% in Q3), with the press release stating tightening reflects "concerns about deteriorating asset quality in this loan segment". The net balance is expected to pick up a little further to 7% in Q1-25.
• Credit standards for loans for house purchase were broadly balanced (net balance of 1% in Q4 vs -3% in Q3). This follows three quarters of easing, The net balance of banks which expect credit standards to tighten is expected to pick up 1ppt in Q1-25 to 2%.

Most EGBs are marginally tighter vs. Bunds this morning (less than 1bp), with an uptick in European equities helping that move

• Dutch paper the exception, following some pre-DSL auction concession (~0.5bp wider last).
• OAT/Bunds last 73.5bp with November closing lows at ~73bp eyed. A break below there would expose 71.6bp, which protects the psychological 70bp mark.
• French fiscal and political risks continue to limit further tightening pressure at this juncture, with headline cues on that front set to become more prominent in the coming days/weeks.
• BTP/Bunds holds around 110bp, with cycle closing lows at 106.4bp presenting the next downside target.
• Impact of supply from Italy and the Austrian long end syndication eyed for short-term cues.