A Touch Firmer As Dovish ECB Speak Weighed Against Heavy Supply

Core/semi core EGBs have pared early gains but still sit firmer on the day, as markets weigh up heavy supply with this morning's ECB speak.

• Governing Council members Wunsch (after hours Tuesday) and Kazaks (this morning) came across dovish vs their usual leanings, with comments consistent with other recent ECB hawks regarding a potential cut in June.
• Those comments come against a backdrop of heavy morning supply: 3/7/15-year BTPs (and a BTP Green), 10-year Bund, 7/20-year Portuguese OTs, and a Slovenian 10-year syndicated tap.
• Bunds are +17 ticks at 133.30, still almost 100 ticks shy of Friday's post US labour report high. Futures remain in a short-term uptrend and the latest pullback is considered corrective.
• German and French cash yields are 1 to 2bps lower on the day, while 10-year periphery spreads to Bunds are a touch tighter with the exception of Greece. The 10-year BTP/Bund spread sits comfortably below 130bps, currently 1.1bps tighter at 126.8bps.
• The ECB is set to reveal the outcome of its operational framework review later today. See our preview here.
• The regional calendar is otherwise light, with comments from the ECB's Cipollone (1145GMT/1245CET) and Stournaras (1400GMT) scheduled.