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BONDS: EGBs-GILTS CASH CLOSE: Gilts Outperform Amid Core FI Gains

BONDS

Core EGBs and Gilts rallied Tuesday amid a broader global safe haven bid.

  • There was no evident single trigger for the strong afternoon rally in core FI: factors included lower oil prices (on positive Libyan supply headlines), a drop in tech stocks as the US returned from holiday, and a miss in US data (construction activity and ISM manufacturing).
  • A few comments from ECB officials ahead of next week's decision didn't have a major market impact: Nagel said he wouldn't commit in advance on whether he would vote for a cut; Simkus sees a "clear case", however an October cut is "quite unlikely".
  • Eurex futures volumes were dominated by Sep/Dec rolls, which are by now at least halfway complete.
  • Both the UK and German curves bull flattened. Gilts outperformed global peers, with 15-year Gilt syndication seeing solid demand.
  • Periphery EGB spreads closed wider against the risk-off backdrop, with BTPs underperforming.
  • Wednesday's schedule includes final August services PMIs and Eurozone PPI, as well as an appearance by ECB's Villeroy.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

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Core EGBs and Gilts rallied Tuesday amid a broader global safe haven bid.

  • There was no evident single trigger for the strong afternoon rally in core FI: factors included lower oil prices (on positive Libyan supply headlines), a drop in tech stocks as the US returned from holiday, and a miss in US data (construction activity and ISM manufacturing).
  • A few comments from ECB officials ahead of next week's decision didn't have a major market impact: Nagel said he wouldn't commit in advance on whether he would vote for a cut; Simkus sees a "clear case", however an October cut is "quite unlikely".
  • Eurex futures volumes were dominated by Sep/Dec rolls, which are by now at least halfway complete.
  • Both the UK and German curves bull flattened. Gilts outperformed global peers, with 15-year Gilt syndication seeing solid demand.
  • Periphery EGB spreads closed wider against the risk-off backdrop, with BTPs underperforming.
  • Wednesday's schedule includes final August services PMIs and Eurozone PPI, as well as an appearance by ECB's Villeroy.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

Keep reading...Show less