Bearish Mix Promotes Cheapening/Steepening Theme, UK Front End Insulated By Data

Monday’s core global FI cheapening has extended in the main, with the major exception being the front end of the UK curve on the back of cooling partial domestic labour market data (the broader cheapening has still dragged short end gilts off session bests, with that curve twist steepening).

• A quick reminder that Monday’s move was linked to U.S. efforts to prevent widening of the Israeli-Hamas conflict through the broader Middle East region, alongside a lack of meaningful weekend escalation in the conflict.
• U.S. President Biden’s impending visit to Israel has probably added further momentum to that move, with the U.S. “very actively” involved re: talks to release Israeli hostages in Gaza.
• Meanwhile, a heavy supply burden in both Asia-Pac and European developed government bond markets will have helped apply further pressure.
• Finally, the hawkish combination of touted wage demands from Japan’s largest wage union re: Spring '24 wage talks and BBG sources pointing to adjustments higher in the BoJ’s upcoming updated CPI projections provided a hawkish Japanese news combination to digest.