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BONDS: EGBs-GILTS CASH CLOSE: Tentative Stabilisation As ECB Cut Nears

BONDS
BulletMarketsFixed Income Bullets

European FI stabilized Tuesday after two consecutive weak sessions, with Gilts modestly outperforming Bunds.

  • Short-ends/bellies outperformed on regional curves in steepening moves (Germany's lightly twist steepening, the UK's bull steepening), as equities sold off overnight on China economic stimulus disappointment.
  • The early rally faded, though no single factor was evident. In data, German industrial production growth surprised to the upside, a development we had flagged was possible yesterday.
  • Bundesbank President Nagel said he was “open” to an October cut, with the noted hawk's comment serving to confirm market pricing for next week's decision (still over 90% implied of a 25bp cut).
  • Periphery EGBs started on the back foot in line with the initial risk-off cross-asset move, but spreads tightened as equities recovered from session lows.
  • Wednesday's docket includes German trade data, and ECB commentary from Villeroy and Elderson.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

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European FI stabilized Tuesday after two consecutive weak sessions, with Gilts modestly outperforming Bunds.

  • Short-ends/bellies outperformed on regional curves in steepening moves (Germany's lightly twist steepening, the UK's bull steepening), as equities sold off overnight on China economic stimulus disappointment.
  • The early rally faded, though no single factor was evident. In data, German industrial production growth surprised to the upside, a development we had flagged was possible yesterday.
  • Bundesbank President Nagel said he was “open” to an October cut, with the noted hawk's comment serving to confirm market pricing for next week's decision (still over 90% implied of a 25bp cut).
  • Periphery EGBs started on the back foot in line with the initial risk-off cross-asset move, but spreads tightened as equities recovered from session lows.
  • Wednesday's docket includes German trade data, and ECB commentary from Villeroy and Elderson.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

Keep reading...Show less