BONDS: Curves Bull Steepen As Global Growth Concerns Build

The German and UK cash curves have bull steepened alongside US Treasuries this morning, as a confluence of factors support core FI.

• A surprise 20bp MLF cut from the PBoC overnight set the tone, before weak UK and European earnings (particularly in Autos) sparked a broader risk-off.
• Soft European survey data from France and Germany (IFO) alongside a continued unwind of JPY carry trades helped exacerbate the moves.
• Bund futures reached a high of 132.78 but now trade at 132.69 (+35 ticks today) as equity markets stabilise somewhat. Gilts are similarly +29 ticks at 98.11, down from a high of 98.21.
• The German and UK 2s10s curves have steepened almost 2bp today, with the latter challenging March 2023 steeps at typing. 
• 10-year peripheral spreads have widened again amid the equity market weakness.
• Italy issued the new 3.10% Aug-26 BTP Short Term today (alongside a re-opening of two BTPei’s), which attracted a bid-to-cover ratio of 1.50x. 
• Focus now turns to commentary from Bundesbank’s Nagel at 1200BST/1300CET, before today’s US macro data (Q2 GDP prelim, jobless claims).