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Bonds and Rates futures remain heavy

BONDS
  • A busier start for Govies and Rates, which saw further early selling pressure into Bund, EGBs and Euribor.
  • Futures markets have since bounced off their respective lows, but remains in the red and heavy.
  • Bund trades in a 123 ticks range, and the German curve initially bear flattened and tested the July low at 32.090.
  • The level has held, and the curve unwinds the early price action.
  • Peripherals spreads are wider, and Portugal and Spain lead, by 1.3 and 1.5bp respectively.
  • EU final CPI was leaked and came inline with consensus.
  • Gilt future outperforms Bund somewhat, although still trade in the red.
  • The small divergence has brought the Gilt/Bund spread 1bp tigher, after the spread found resistance at the 22nd March high at 120.05bps, now trading at 119.1bps.
  • With Tnotes Future outperforming Bund, the Tnote/Bund yield spread has moved another 5.4bps tighter.
  • The spread is below the August low, with next support seen at 175.62bps, 38.2% short term retrace of the June/August widening, now trading at 176.0bps.
  • Looking ahead, US Existing home sales and Leading index are the economic releases.
  • Fed George and Kashkari are the scheduled speakers.
  • And US. will sell $8bn 30y TIPS Reopening.

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