ECB: Simkus Provides Support For 3 More Cuts This Year
Headlines crossing on BBG from ECB Simkus' interview with Econostream:
- "*ECB'S SIMKUS: AGREE WITH EXPECTATIONS FOR 3 MORE CUTS IN 2025"
- "*ECB'S SIMKUS: DIRECTION OF TRAVEL IS CLEAR, NEXT MOVE CLEAR"
- "*ECB'S SIMKUS: DONT SEE ANY GOOD REASON NOT TO CUT IN MARCH"
A 25bp cut in March is very well embedded into consensus and market pricing. However, comments around the trajectory of rates comes in contrast to Schnabel's hawkish interview with the FT yesterday ("for me, the direction of travel is not so clear anymore").
- We view Simkus as a centrist/hawkish leaning member of the Governing Council, so his comments supporting further rate cuts expose Schnabel (alongside Holzmann) as a clear hawkish outlier within the ECB.
- On February 3, Simkus said that "I don’t think the March cut should be the last one but decisions will depend on data available at the time,”...“Going forward, we can allow ourselves a looser policy.”
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BUNDS: Look to close the opening gap
Schatz Swap related trade, suggest Payer:
- DUH5 ~5.3k at 106.62.
In outright futures, Bund still look at closing the opening gap to 131.76.
CANADA DATA: MNI CPI Preview: An Added Complication Amidst Tariff Fears
We have published and e-mailed to subscribers the MNI Canada CPI Preview ahead of today's release, with a particularly wide range to analyst estimates owing to uncertainty over when a temporary tax holiday will have greatest impact.
Please find the full report here.
EGBS: Bunds Weaken Alongside USTs As Markets Digest Trump Inauguration
Bund futures have weakened through the morning, with the weaker-than-expected German ZEW survey providing little reprieve. Futures are -2 ticks today at 131.82.
- Fallout from US President Trump’s inauguration remains a key focus, with Bunds having moved away from overnight highs alongside Treasuries as markets assess the President’s jawboning around tariffs. Today's EGB supply developments will have also factored into price action.
- Bund futures have entered a corrective phase following the recovery from the January 14 lows, and a continuation higher would open 132.41, the 20-day EMA. The medium-term trend is unchanged though, it remains bearish.
- The German curve has twist flattened, with 2-year yields 1bp higher and 30-year yields 2.5bps lower.
- Orderbooks for today’s 15-year OAT syndication are in excess of E135bln, a record size for a French transaction. MNI expect a size of E5-8bln, with upside risks of E9-10bln.
- Lithuania are also holding a dual-tranche syndication today, while Germany has held a conventional green Bund auction.
- Spain has issued a mandate for a new 10-year Obli. We pencil in a transaction size of E10-15bln.
- 10-year peripheral spreads to Bunds are within 1bp of yesterday’s closing levels.
- ECB dove Centeno is scheduled to speak at 1100GMT/1200CET.
