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BONDS: EGBs-GILTS CASH CLOSE: Intraday Reversal Sees Modest Bear Flattening

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European curves flattened Tuesday, with relatively pronounced weakness at the short end of curves.

  • Futures peaked in early trade, as Federal Reserve 50bp cut pricing ticked higher
  • But Bunds and Gilts pulled back sharply after 1300UK as oil and equities picked up, while US retail sales data came in slightly stronger than expected on balance, helping keep pressure on the space.
  • The main European data release was German ZEW which surprised to the downside, but it was not a market mover.
  • Bunds underperformed Gilts, with both curves flattening on the day on a short-end yield backup as implied 2024 BoE and ECB cuts ticked up 2-3bp from intraday lows.
  • Periphery EGB spreads closed basically unchanged, reversing early tightening.
  • While the Fed decision after the European cash close takes top billing Wednesday, the early highlight is UK CPI which the BoE will have in hand ahead of its decision release Thursday. An uptick in services prices is expected, though the BoE will likely look through any surprises - MNI's preview is here (PDF). 

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

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European curves flattened Tuesday, with relatively pronounced weakness at the short end of curves.

  • Futures peaked in early trade, as Federal Reserve 50bp cut pricing ticked higher
  • But Bunds and Gilts pulled back sharply after 1300UK as oil and equities picked up, while US retail sales data came in slightly stronger than expected on balance, helping keep pressure on the space.
  • The main European data release was German ZEW which surprised to the downside, but it was not a market mover.
  • Bunds underperformed Gilts, with both curves flattening on the day on a short-end yield backup as implied 2024 BoE and ECB cuts ticked up 2-3bp from intraday lows.
  • Periphery EGB spreads closed basically unchanged, reversing early tightening.
  • While the Fed decision after the European cash close takes top billing Wednesday, the early highlight is UK CPI which the BoE will have in hand ahead of its decision release Thursday. An uptick in services prices is expected, though the BoE will likely look through any surprises - MNI's preview is here (PDF). 

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

Keep reading...Show less