BONDS: Core FI Off Lows But Still Well Short of Monday High

Renewed fragility in global equity futures have supported core bond markets off the lows and the particularly risk-sensitive tech sector (NVidia already lower by as much as 2% pre-market) is underpinning the bounce.

• Bund futures have recovered around 80 ticks from overnight lows and while Gilt futures are also off the week's lowest levels, are underperforming Bunds by a notable margin
• The Gilt curve has bear flattened, while German cash yields are flat to 2bps lower. This has allowed the 10-year Gilt/Bund spread to move back above 170bps. This is mirrored in the more sizeable recovery for year-end OIS-implied rates, as BoE rates claw back 20bps of dovish pricing off the Monday low, relative to ECB's 14bps. Weaker EZ retail sales will have also helped at the margin.
• Today’s supply featured a strong 20-year Gilt auction from the UK and an acceptable Bobl auction from Germany. Austria also issued 10/15-year RAGBs.
• Although European equity futures have drifted away from intraday highs, 10-year peripheral spreads to Bunds are generally tighter, while the OAT/Bund spread is now around 77bps (vs over 80bps yesterday morning).