[MARKET ANALYSIS] Fixed rebounds from Monday's pressure into data & supply

• Benchmarks bounce this morning with JGBs firmer overnight, having picked up off post-election lows, USTs rebounding from the pressure after the China diversification report. JGBs firmer by near 30 ticks at best, back to the week's 131.60 opening level.
• Gilts have also rebounded, as the immediate pressure on PM Starmer eased slightly after the Cabinet backed him yesterday and no fresh revelations emerged overnight. As such, the benchmark gapped higher by 23 ticks before climbing to a 90.88 peak, firmer by 37 ticks on the day. However, Starmer's situation remains fraught into the end-February by-election, May local elections and amidst that any fresh revelations about his dealings with Mandelson. On that point, the Mail on Sunday's Hodges reports that Starmer appears to be planning to limit what is published re. Mandelson, and the Cabinet Office have asked Ministers not to publish their personal messages with Mandelson, after Wes Streeting made his available.
• Limited newsflow for EGBs thus far. As such, the benchmark is firmer given the bias from above, but with magnitudes more modest as EGBs were not hit directly by the China-UST report or the Starmer situation on Monday. As it stands, Bunds firmer by 10 ticks in 128.30-46 parameters. No move to ECB speak, which has stuck to the script. Ahead, we have supply from Germany in the form of a 2031 Bobl tap; recent history for this has featured b/c's below the 2x mark.
• Back to USTs, the benchmark is firmer by a handful of ticks at a 112-10 high, looking to last week's 112-16+ peak. The docket is headlined by data (weekly ADP, Retail Sales & ECI) before Wednesday's Payrolls & Friday's CPI; additionally, 3yr supply is scheduled just after 2026 voters Hammack and Logan.

Today's market sees a rebound in fixed income benchmarks, particularly as JGBs and USTs recover from recent pressures, influenced by external reports and domestic political dynamics. The bounce in Gilts following supportive Cabinet backing for PM Starmer suggests a temporary stabilization, while attention turns to upcoming economic data that may shape monetary policy expectations ahead of key CPI and payroll readings. This uplift across bonds could signal a sentiment shift but remains contingent on forthcoming data and geopolitical developments.