BONDS: Recovery From Lows As Markets Digest PMIs & European Wage Data

EGBs and Gilts have moved off intraday lows as markets digest flash PMI data and Q1 Eurozone negotiated wages.

• UK PMI data allowed gilts to recover from session lows after European equivalents applied some pressure.
• The UK (and to a lesser extent, Eurozone) services PMI was softer than expected, while snippets on services pricing were mildly dovish.
• ECB Q1 negotiated wages rose to 4.7% Y/Y from 4.5% prior. See our earlier post for more colour on that front.
• Bunds are -9 at 130.36, unable to sustain a breach of the May 14 low at 130.24.
• German & French curves see some modest twist flattening on the day.
• ~E48bln of OAT redemptions and coupons are available for reinvestment as of today.
• 10-year periphery spreads to Bunds are biased tighter.
• ECB-dated OIS contracts are off hawkish extremes, last showing 62bps of cuts through year end.
• Gilt futures are +10 at 97.09 last, recovering from lows of 96.58. Yesterday’s low was breached before the PMI-driven recovery.
• Gilt yields out to 30s moved through yesterday’s highs pre-rally, last sitting ~1bp lower on the day across the curve.
• Similarly, the unwind of BoE rate cut premium extended further before a move back to pricing ~36bp of ’24 cuts.
• The European & UK calendars are limited for the remainder of today, moving attention to this afternoon’s US data.