BONDS: Small Uptick Pre-ECB

Little in the way of headlines as bonds firm a little. Core yields still higher on the day with equities and oil comfortably off yesterday’s lows.

• Bunds still ~35 ticks lower on the day.
• German yields 1.5-4.0bp higher on the day, bear flattening.
• Peripheral spreads 1.0-2.5bp tighter vs. Bunds, BTPs outperform.
• BTP futures back towards resistance at yesterday’s high, 10-Year Italian yields hovering just above yesterday’s multi-month lows.
• Gilts also off lows, with futures retaking 101.00, trading around the middle of yesterday’s range.
• UK yields little changed to 2bp higher, also bear flattening.
• Our full preview of the impending ECB decision is here: https://roar-assets-auto.rbl.ms/files/67296/ECB%20Preview%20September%202024.pdf
• With a 25bp deposit rate cut unanimously expected, focus will move to the accompanying rhetoric.
• Our baseline scenario looks for President Lagarde to indicate a willingness to cut policy rates further but refuse to be drawn into speculating on the October meeting. Instead, Lagarde is set to reaffirm the data-dependent and meeting-by-meeting approach.
• Further afield, U.S. weekly jobless claims and PPI data provides some risk, with the former under scrutiny given the Fed’s focus on the employment side of its mandate.