November 12, 2024 10:39 GMT
BONDS: EGBs Outperform On Soft ZEW, Gilts Wider
BONDS
Softer-than-expected German ZEW data drives EGB outperformance vs. peers.
- Political headwinds from the U.S. weighed on the data, with the domestic political situation also impacting sentiment covering the immediate term (although optimism over the longer run in recent days was noted).
- Bund futures +8 at 132.59, recovering from lows of 132.24.
- German yields 1.5-3.0bp lower, flatter. Dip in cover at Schatz auction counters some of the rally in the front end.
- EGBs a little wider vs. Bunds after yesterday’s general, modest narrowing. Weakness in equities helps explain peripheral underperformance
- ECB’s Rehn reaffirmed the easing direction evident in policy settings, with the speed contingent on future data developments.
- Little net movement in ECB pricing on the day, 125bp of cuts priced across the next 5 meetings, with risks of 50bp moves priced through March.
- Gilts lag German peers, with cues from Tsys eyed.
- Futures -21 at 94.10 vs. lows of 93.96. Bearish theme intact.
- Yields little changed to +3.5bp, curve bear flattens.
- 10s ~3bp wider to Bunds, spread last 213bp, a handful of bp off last week’s cycle wides.
- BoE chief economist Pill provided little of note, with initial comments reaffirming his hawkish leanings, before some more centrist comments (playing down feedthrough from the Budget, for instance) became apparent.
- Oct-43 gilt supply passed smoothly.
- BoE pricing shows 3bp of cuts for Dec, 28bp through March, 47bp through June and 64bp through Dec ’25. 1-3.5bp less dovish on the day.
- Little of note on the European & UK calendars this afternoon, leaving focus on cross-market moves and the U.S. return from holiday.
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