OIL: Mexico's Sheinbuam States Need to Reduce Energy Dependence

European yields rose modestly Tuesday, with Bunds slightly outperforming Gilts.

• After some initial risk-on pressure stemming from the US's delay imposing tariffs on Canada and Mexico, core EGBs/Gilts saw an afternoon bid as US job openings data were weaker than expected.
• MNI published a sources story noting that the ECB is likely to adjust its reference to policy restrictiveness in its next statement in March, but there would be resistance on the Governing Council to completely removing it (link). And on the US tariffs front, MNI reported that while the EU is likely to seek to deescalate any trade dispute with the U.S. via negotiation, it may also look to increase non-tariff barriers (link).
• Limited data included French budget balance (2024 deficit slightly smaller than foreseen in November's draft finance bill); Spain saw a smaller rise in January unemployment than expected.
• The German curve lightly bear flattened, with the UK's bear steepening.
• Periphery EGB spreads tightened marginally, led by BTPs. French OAT spreads were flat ahead of Wednesday's censure votes on the Bayrou government.
• Wednesday's schedule includes final Services/Composite PMIs (including the first and final readings for Italy and Spain) and Eurozone PPI, while ECB's Lane makes an appearance. Attention turns to the Bank of England decision Thursday - MNI's preview is here (PDF).

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 1.7bps at 2.051%, 5-Yr is up 1.5bps at 2.17%, 10-Yr is up 1.1bps at 2.396%, and 30-Yr is up 0.7bps at 2.646%.
• UK: The 2-Yr yield is up 1.6bps at 4.181%, 5-Yr is up 2.7bps at 4.188%, 10-Yr is up 3.5bps at 4.522%, and 30-Yr is up 3.5bps at 5.125%.
• Italian BTP spread down 1.7bps at 110bps / French OAT down 0.2bps at 72bps  
   

• It would be a huge surprise to the market if this week’s MPC meeting delivered anything other than a 25bp cut to bring Bank Rate to 4.50%.
• The bar is also high for forward guidance to be meaningfully tweaked. We would be surprised if the vote split wasn’t 8-1 (also the base case for 18/22 sellside previews we read), although there are risks around the vote, particularly from the Agents’ Pay Survey.
• The Agents'; Pay Survey is the single measure with the most potential to cause surprises overall, both this week (to MPR projections, the vote split etc) and to future policy.
• We look at how data has evolved, expectations for the MPR projections as well as summarising over 20 sellside views.

FOR THE FULL PUBLICATION PLEASE USE THE FOLLOWING LINK: MNI BoE Preview - Feb25.pdf

• "*TRUMP AND XI ARE NOT SPEAKING TODAY, OFFICIAL SAYS : WSJ" (BBG)
• From the note: "President Trump and his Chinese counterpart Xi Jinping will not be speaking on the phone today, a U.S. official said, despite an earlier claim by trade adviser Peter Navarro that they would hold a conversation."