BONDS: German & UK Curves Steepen Following Fed, Peripherals A Touch Tighter

EGBS and gilts recover from session lows alongside Tsys.

• Reaction to yesterday’s 50bp Fed cut and Chair Powell’s warning against the assumption that the move sets a precedent for the pace of subsequent easing dominates thus far. Curves twist steepen.
• Bund futures -15 at 134.17.
• German yields 2bp lower to 3bp higher.
• EUR3m10y prints another fresh cycle low, promoting modest peripheral spread tightening, further aided by a bid in equities.
• Demand at the latest round of Spanish supply wasn’t particularly strong, with covers on the softer side and amount sold at the lower end of the target range. Solid pricing provided some counter, ultimately limiting market reaction.
• French supply saw better demand.
• ECB-speak stuck to the data-dependent theme.
• Gilt futures little changed at 100.26.
• UK yields 3bp lower to 1bp higher.
• The BoE decision headlines the regional calendar today.
• No change in rates expected, with the MNI baseline looking for 2 dovish dissenters (7-2 vote split) and a slightly more aggressive than consensus GBP110bln announcement for QT between Oct ’24 & Sep ’25.
• We have provided plenty of colour on vote split and QT pace scenarios throughout the morning, please see the relevant bullets for deeper insight.