Better Bid

Core EGBS seem happy to mainly take their cues from Gilts & U.S. Tsys leaving paper biased richer on the day.

• The latest batch of German ZEW data saw a sharper than expected deterioration in the expectations metric, while the fall in the current situation metric wasn’t quite as pronounced as expected.
• ECB GC member Villeroy reiterated his higher for longer thesis, while outlining general expectations re: inflation. ECB-dated OIS terminal pricing is a couple of bp softer on the day, showing around 4.0% in deposit rate terms.
• The major German cash benchmarks sit 1.5-4.0bp richer, bull flattening, while Bund futures tag fresh session highs, last +40 or so.
• Wider core/semi-core EGBs generally see similar moves, although the Dutch curve sees some very light cheapening at the front end.
• Spreads vs. 10-Year Bunds are little changed to a touch wider core/semi-core.
• Dutch issuance saw smooth enough absorption, while the EU & Greek syndication processes progress. 5-Year German supply results will cross around the bottom of the hour.
• Peripherals are also wider vs. Bunds at the 10-Year point, with GGB widening once again the most pronounced amidst supply-related pressures (2bp wider on the day, with the 10-Year GGB/Bund spread looking through yesterday’s wides). Outright peripheral trade generally sees outperformance in the intermediate zone of those curves.