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BONDS: Gilt/Bunds Above 190bp, Eyes Sep '23 Wides

BONDS
BulletMarketsFixed Income Bullets

Recent Gilt/Bund widening extends, with the 10-Year spread breaching 190bp at typing.

  • The spread has not closed above 190bp since September ’23.
  • The next upside level of note comes in at the September 5 ’23 closing high (191.36bp).
  • This morning’s combination of dovish ECB repricing and increased odds of imminent French fiscal adjustments has driven the latest leg of widening.
  • Meanwhile, the stickier short-term inflation outlook and relatively resolute economic performance in the UK factors in on the gilt side.
  • The BoE’s reluctance to firmly commit to follow up rate cuts and the risk of increased UK issuance are also noted.

Fig. 1: 10-Year Gilt/Bund Spread (bp)

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Recent Gilt/Bund widening extends, with the 10-Year spread breaching 190bp at typing.

  • The spread has not closed above 190bp since September ’23.
  • The next upside level of note comes in at the September 5 ’23 closing high (191.36bp).
  • This morning’s combination of dovish ECB repricing and increased odds of imminent French fiscal adjustments has driven the latest leg of widening.
  • Meanwhile, the stickier short-term inflation outlook and relatively resolute economic performance in the UK factors in on the gilt side.
  • The BoE’s reluctance to firmly commit to follow up rate cuts and the risk of increased UK issuance are also noted.

Fig. 1: 10-Year Gilt/Bund Spread (bp)

Keep reading...Show less