Rates Spark: Push And Pull Between U.S. And Euro Rates

2025-03-04 04:20:00 ET

Summary

• Euro rates jumped higher on defence spending expectations and higher-than-hoped-for inflation.
• On Thursday we can expect questions about the ECB's role in European defence spending.
• Meanwhile, US Treasuries continue to rally. Not much room south of 4% on the 10yr, unless payrolls provide some room. There's an angst trade too in long Treasuries for now.

By Michiel Tukker , Benjamin Schroeder , Padhraic Garvey, CFA

US Treasuries home in on 4%, but around that should really be it

The US 10yr has 4% in its sights. Momentum certainly has that area as the next big level to aim for, following a run of data and events that have conspired to propel yields lower. The latest was Monday’s ISM report. Below 50s on many parts of this report were a theme in 2023 that never resulted in a material weakening tendency for the wider economy. But this time it’s been interlaced with an element of US tariff interpretation focused on potential future negatives. And last Friday’s showdown in the White House has acted to sustain the undercurrent of angst, again propelling Treasuries....

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