BUNDS: /SWAPS: Bundesrat Passes Fiscal Bill, Reaction In Bunds Limited

Greenback strength continues to show in recent trade - dragging EUR/USD further off the recovery high posted last week at 1.0514. Move looks isolated from broader risk given the USD's gradual strengthening alongside equities since the beginning of the week, however the very recent drift to session lows for the EuroStoxx future (which hit an alltime high yesterday) could be adding some conviction here.

• For the ICE USD Index, price has bumped back above 107.00 meaning markets have steered clear of a test on the uptrending 100-dma of 106.396. This leaves 107.838 as the next notable intraday level: the 38.2% retracement for the downleg posted off the early February high.
• Volumes were understandably light on Monday (US Presidents' Day) but the muted theme extended into Tuesday and it's only today that we're seeing markets return to form: EUR futures have seen a decent pick up in interest both at the open today and throughout the morning - with focus now shifting to the FOMC minutes due later today.

• The RBNZ rate decision spurred initial heavy selling in NZD, as markets responded to the 50bps rate cut to prompt a 0.5678 low in NZD/USD. The move proved short-lived, with the rally off lows coinciding with the RBNZ's signals that the OCR may only have limited room to fall further. As such, a short-covering bounce to 0.5732 has stuck, keeping the NZD the strongest performer in G10 headed into the NY crossover.
• The single currency is the poorest performer so far, pressing EUR/USD back below 1.0450 and through yesterday's lows in the process. The move comes as part of the a broader bounce off lows for the USD Index in a move that looks idiosyncratic relative to broader market risk appetite: the EuroStoxx50 continues to plumb alltime highs.
• UK inflation data came in ahead of expectations, however the details show little evidence that should push any MPC votes in either direction - with the upside surprises stemming from core goods and food prices - leaving UK rates markets primed for the next BoE cut at the June meeting.
• Datapoints are few and far between Wednesday, with US housing starts and building permits the primary releases. This should leave markets with plenty of capacity to digest the FOMC minutes later today - at which traders will be on watch for the rationale behind the Fed's recent shift in statement language concerning inflation.

The lowest accepted price of 100.213 was a touch below the prevailing pre-auction mid-price of 100.2175. Meanwhile, the bid-to-cover ratio was a little below than the last two auctions of the 4.375% Mar-28 Gilt (3.09x vs 3.20x at the January reopen, 3.12x at the November launch).

• Yield tail of 0.5bps little wider than in January (0.2bps), but tighter than the 1bp seen in November.
• Fairly contained reaction in Gilt futures since the results were published, now -47 ticks on the session at 92.14.