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BONDS: EGBs-GILTS CASH CLOSE: Bunds Gain On Lagarde Inflation "Confidence"

BONDS
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Gilts underperformed, as Bunds strengthened to start the week.

  • Curves bear flattened early on, with German state-level inflation if anything on the dovish side of expectations. But European bonds sold off regardless, which was seen as the result of overly-dovish positioning going into the releases.
  • Core EGBs rallied sharply in early afternoon on ECB President Lagarde's commentary that the latest inflation developments "strengthen our confidence" and "we will take that into account" at the October meeting. MNI published an ECB sources piece titled "Chances of October ECB Cut At Least 50-50" (link here).
  • The UK curve bear flattened on the day, with Germany's leaning bull flatter as implied October ECB cut pricing touched 92%, compared to 20% at the start of last week.
  • Periphery EGB spreads widened modestly as European equities reversed Friday's gains.
  • BoE's Greene speaks after the cash close. Tuesday's agenda includes Euro flash HICP (MNI is tracking a 1.7% Y/Y figure), final manufacturing PMIs, and ECB speakers including Nagel, Rehn and de Guindos.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

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Gilts underperformed, as Bunds strengthened to start the week.

  • Curves bear flattened early on, with German state-level inflation if anything on the dovish side of expectations. But European bonds sold off regardless, which was seen as the result of overly-dovish positioning going into the releases.
  • Core EGBs rallied sharply in early afternoon on ECB President Lagarde's commentary that the latest inflation developments "strengthen our confidence" and "we will take that into account" at the October meeting. MNI published an ECB sources piece titled "Chances of October ECB Cut At Least 50-50" (link here).
  • The UK curve bear flattened on the day, with Germany's leaning bull flatter as implied October ECB cut pricing touched 92%, compared to 20% at the start of last week.
  • Periphery EGB spreads widened modestly as European equities reversed Friday's gains.
  • BoE's Greene speaks after the cash close. Tuesday's agenda includes Euro flash HICP (MNI is tracking a 1.7% Y/Y figure), final manufacturing PMIs, and ECB speakers including Nagel, Rehn and de Guindos.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

Keep reading...Show less