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2 weeks ago | 
think.ing.com | Padhraic Garvey |Michiel Tukker |Benjamin Schroeder
A pause for now is good news for the eurozone and the 10Y swap rate is back at levels from before "Liberation Day". The significant rise in UST yields played an important role in this. The front end of the curve still trades at lower rates, reflecting the still-outstanding risks on investors’ minds. Markets are reverting to an ECB landing zone between 1.75-2%, a range which was held for many months previously. But we remain wary that the situation could easily worsen again.
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2 weeks ago | 
think.ing.com | Padhraic Garvey |Benjamin Schroeder |Michiel Tukker
Whilst Dutch pension funds feel the pain from lower equity prices, the coalition party NSC is still trying to change the rules of the current reforms. In the latest proposal, each pension fund would no longer be required to obtain a vote of approval before transitioning from a defined benefits system to a defined contributions system. Instead, pension funds would have to offer the participants the possibility to opt-out from the transition of his or her assets to the new system.
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2 weeks ago | 
think.ing.com | Padhraic Garvey |Benjamin Schroeder |Michiel Tukker
Dollar exposure's getting pushed and pulled in a still whippy market We make the argumentation for the US 10yr to break down to 3.5% here, and why it's likely to revert then higher again. Beyond that, there are three factors to latch on to. The first is the fall in breakeven inflation. This was unexpected, as tariffs are generally accepted as placing upward pressure on prices, even if the debate as to whether it's inflationary is not settled.
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3 weeks ago | 
think.ing.com | Michiel Tukker |Padhraic Garvey
Markets clearly not pleased and rates impact is complex Markets did not like the list of tariffs Trump presented yesterday, and the numbers appear worse than feared. The S&P 500 futures are down more than 2% from Wednesday's open and the UST 10Y yield came down from 4.20% to just above 4%. European markets saw the STOXX futures down 2.5% this morning, while the 10Y Bund future points to a 9bp drop in yields.
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3 weeks ago | 
think.ing.com | Padhraic Garvey |Michiel Tukker
Treasuries are viewing the complex ahead as glass half empty for macroeconomic activity. Survey evidence continues to prompt that reaction, and the swash-buckle tone being adopted by the Trump administration now generates more apprehension than confidence. We'll know more as we progress through 2 April (so-called liberation day).
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3 weeks ago | 
think.ing.com | Michiel Tukker |Padhraic Garvey |Benjamin Schroeder
Inflation numbers unlikely to cause a break below the 1.75-2% ECB landing zone range The eurozone inflation numbers are coming in just a day before Trump’s tariff announcements. With risk sentiment deteriorating over the past week, markets have been keen to price in a European Central Bank landing point of 1.75% again, after hugging closer to 2% for most of this month. But to break sustainably below 1.75% seems more difficult and hasn’t happened yet this year.
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1 month ago | 
think.ing.com | Benjamin Schroeder |Michiel Tukker |Padhraic Garvey
No compromise in Germany yet, but the market is not losing hope entirely As trade tensions start to escalate risk assets continue to be on the back foot. The EUR curve bull steepened with 2y German bond yields down by 4bp and outperforming swaps.10y Bund yields came off 2bp while also outperforming swaps by 1bp. Meanwhile, Germany’s fiscal package was subject to a first heated debate in the Bundestag on Thursday.
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1 month ago | 
think.ing.com | Benjamin Schroeder |Michiel Tukker |Padhraic Garvey
More interesting are the developments at the back end of the curve, which saw the 10Y swap rate rise another couple of basis points on the day. From a fair value perspective, we often look at long-term nominal growth expectations as an anchor point for 10Y rates. The ECB’s Survey of Professional Forecasts would imply a 10Y rate of around 3.3%, and these numbers were even from before the grand spending announcements of this week.
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1 month ago | 
think.ing.com | Padhraic Garvey |Michiel Tukker |Benjamin Schroeder
Records were broken by the surge in Bund yields on the news of more German spending. The 10Y Bund yield now stands at 2.8%, the highest level since 2023, and this was when inflation just came down from double-digit numbers. Bloomberg even headlined that Bunds experienced their worst day since the fall of the Berlin Wall. The market moves are much more fundamental than just revised expectations of Bund issuance. The 10Y swap also rose a significant 23bp on the day, bringing it north of 2.6%.
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1 month ago | 
think.ing.com | Michiel Tukker |Benjamin Schroeder |Padhraic Garvey
Headlines abound about the size of the spending spree ahead: French President Macron had signalled €200bn from the EU to boost defence spending and countries are urged to increase their defence expenditure to 3% to 3.5% of GDP from the current NATO guideline of 2%. A back-of-the-envelope calculation using the 2024 data could amount to €150bn to €220bn from the euro area NATO members.
