Back From Highs, Little Changed On Day

Bonds are off early highs, with EGB & gilt supply, coupled with a recovery from session lows in equities, countering the early rally.

• Bund and gilt futures traded through yesterday’s highs before fading. Bulls failed to test the next meaningful levels of resistance.
• German yields are ~1bp lower across the curve.
• EGB spreads to Bunds are 0.5-2.0bp wider on the day, with the early flight-to-quality and presence of Spanish & French supply driving moves there.
• Both sets of auctions were smoothly digested.
• German ASWs were wider at the open but have pulled back from highs.
• Gilt yields are 1bp lower across the curve.
• Soft pricing metrics at the latest 5-Year gilt auction applied modest pressure.
• Short end markets are back to little changed on the day.
• ECB-dated OIS shows ~24bp of cuts for this month and ~61bp of easing through year end.
• BoE-dated OIS shows ~43bp of cuts through year end, with the next ~25bp cut fully discounted through the Nov MPC.
• BoE’s Pill will appear on a panel later this morning, although we are unsure if there will be any media coverage.
• U.S. data is set to continue to dominate the macro landscape ahead of tomorrow’s NFP release.