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German ASWs vs. 3-month Euribor little changed as they await the next cue.

• This morning’s long end supply is probably countering the impact of the outright bond rally that stems from the UK CPI data and a move away from session highs in European equity futures.
• Note that today will see the Constitutional Court judgement on the so-called solidarity surcharge in Germany - if the case is upheld, it would favour short Bund positioning vs Swaps. More on the matter from our political risk team here.
• However, leaving aside this singular event, already short positioning, the lack of an immediate ramp up in issuance and lingering U.S. tariff threats present some clear risks against further long end ASW narrowing in the near-term, even though fundamentals continue to screen bearishly.

• Some small reversals in European Equities, but these are smaller moves.
• Yesterday's high in VGM5 at 5440.00 was rejected on the Cash open, printed a 5440.00 high also today.
• The Banking index (SX7E) has managed to register another print above the 2011 high on the open, but has fallen back towards flat now.
• The next Psychological area of interest for the Index, is at the 200.00 mark.
• Further out would see 206.47, followed by 217.62, the 38.2% retracement of the 2007/2020 range.

(Chart source: MNI/Bloomberg).

Gilts rally in the wake of the softer-than-expected CPI data detailed earlier, while the potential for larger-than-expected fiscal spending cuts in today’s Spring Statement has increased following press reports pointing to such a move, as the Chancellor looks to stick to the fiscal rules.

• Our full preview of the Spring Statement is here.
• Futures last ~91.45.
• Our technical analyst notes that the short-term technical outlook in the contract remains bearish.
• Yesterday’s low (90.93) protects key support at the Mar 6 low (90.71).
• Key short-term resistance has been defined at 93.01, the Mar 20 high.
• Yields 3.0-7.5bp lower, curve steepens.
• 2s10s still a couple of bp below the psychological 50bp level, although 5s30s has managed to push above the 100bp mark. Next upside level of note in 5s30s is the May ’21 closing high (103.3bp).
• GBP STIRs still around levels we indicated ahead of the gilt open.
• 46bp of BoE cuts showing through year-end vs. ~40bp late yesterday.