• Meanwhile in markets, two months into 2026, the stellar bond market performance continues to stand out. In equities, the divergence between Europe and the US is widening;

• The Bund rally is showing iron-clad resolve, brushing aside hotter-than-expected February CPI prints from France and Spain. All eyes now turn to the 14:00 CET release of German inflation to see whether the Eurozone’s powerhouse follows suit;

• The big news in ECB-land this week was that President Christine Lagarde has begun hinting that the bank may consider exiting its holding pattern with the Deposit Facility Rate (DFR) at 2.00%. For now, that message is barely visible in ESTR forwards, which remain largely unchanged this week. ESTR forwards had already started to price in rate cuts earlier with roughly 8bps are priced by year-end – once adjusting for the expected shift in the DFR–ESTR spread;

• Across the Atlantic, the bonds rally continues as US Treasury yields are down a bp across the curve. The 10-year UST has managed to break below the psychological 4.00% threshold at pixel time;

• In equities, the US–Europe divergence grows larger. The Stoxx 50 is flat today, leaving it up around half a percent for the week. S&P 500 futures are down roughly a quarter of a percent today and sit on marginally larger losses for the week;

• Let’s shift to geopolitics. US–Iran talks came and went yesterday and there is no clarity if a potential US strike is closer or further away. One the one hand, a new round of discussions has already scheduled for next week. Axios reported that US officials were initially disappointed with the morning session but struck a more optimistic tone after the afternoon meetings. At the same time, the outlet noted that President Donald Trump received a briefing on military strike options. The US aircraft carrier USS Gerald R. Ford has now arrived near Israel, though morale among the crew is reportedly muted due to a limited plumbing capacity onboard – if you catch my drift;

• On online prediction markets such as Polymarket, odds of a strike have ticked higher though the odds of a strike this weekend remain low at ten percent. End-March pricing suggests roughly a 50/50 chance, rising toward 70% by year-end. Brent crude is up about a dollar on the day at $71.60 a barrel – still roughly a dollar below yesterday’s highs and two dollars above the lows. Bloomberg estimates suggest around $6 of current pricing reflects a geopolitical risk premium tied to Iran;

• Shifting to other commodities, gold continues its slow march back towards the top. The shiny metal climbed by over a percent this week and sits on six percent gains this month. Even with this rally, the precious metal remains roughly $200 below its all-time high. Copper has also made notable moves, surging nearly 2% this week, following signals from China’s Politburo calling for policies to boost domestic consumption.

• Aside from the German CPI release, attention this afternoon will be on the US January PPI data. After a quiet week, next week ramps up with plenty of data releases including the US February labor market report and January retail sales. Besides that, there are PMI releases for the US and Eurozone member states alongside a steady stream of ECB-speakers.

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