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Big move higher for Bunds, but within yesterday's range

BOND SUMMARY
  • Bunds have retraced much of the weakness seen yesterday in volume-heavy but volatile markets this morning. Yesterday's intraday range saw Bund futures trade between 172.08-174.25, moving to the lows of the yesterday after the cash market closed. Today's moves have seen us move as high as 173.79, before falling back a bit to 173.33 at the time of writing. To put this in perspective, between today and yesterday, cash Bund yields have been in a range of more than 9bp from -0.294% to -0.202.
  • Gilts moved higher on the open but are now little changed compared to yesterday's close while moves in Treasuries have been more subdued.
  • There have been no obvious underlying reasons for the retracement, other than to say this could be a short-term snap higher after the relentless sell-off we have seen in core FI recently. There have been a couple of notable comments from ECB policy makers Lane and Schnabel with the latter suggesting that if real yields rise substantially at the long-end this could be undesirable with the recovery still very fragile. With the sharp sell-off in fixed income (and relatively smaller moves in equities) there could also be some month-end fixed income demand to rebalance portfolios back to their benchmarks.
  • TY1 futures are up 0-7 today at 132-25+ with 10y UST yields down -4.4bp at 1.479% and 2y yields down -2.4bp at 0.151%.
  • Bund futures are up 0.28 today at 173.34 with 10y Bund yields down -2.2bp at -0.255% and Schatz yields unch at -0.659%.
  • Gilt futures are down -0.10 today at 128.03 with 10y yields up 0.8bp at 0.790% and 2y yields down -0.5bp at 0.094%.
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