Away From Yesterday’s Best Levels

Core global FI markets have ticked away from yesterday’s richest levels (which represented fresh YtD bests in some cases).

• Weakness in the super-long end of the JGB curve was touted as a source of pressure in Asia-Pac hours, as that zone of the curve reacted to the BoJ’s Q124 Rinban tweaks, announced after hours on Wednesday (the JGB curve twist steepened on the day).
• Elsewhere, ECB hawk Holzmann noted that rate cuts in ’24 aren’t guaranteed, stressing that is premature to think about lower interest rates. Holzmann reiterated his belief that reaching the ECB’s 2% inflation goal will be “challenging.”
• Holzmann’s comments had no immediate reaction given his well-defined stance, but there has been some modest cheapening in some EGBs in the time since.
• A lower 3-month Euribor fixing has supported the shorter end/STIRs in more recent trade.
• Bund futures are -35 or so around 138.30, at the base of their 42-tick session range. German cash yields are 1.0bp lower to 4.5bp higher as the curve twist steepens.
• EGB spreads to Bunds are generally little changed to a touch wider during the move away from yesterday’s bests. GGBs are the exception, tightening by ~2bp.
• Gilts also move away from yesterday’s best levels, with an eye on global market moves. Futures last show -45 or so at 103.30, registering worst levels of the day at typing. Cash gilt yields are 3.5-6.5bp higher as the curve steepens. Local headline flow has centred on fiscal loosening and speculation re: the general election date after we discovered that the Budget will be released on 6 March ’24.