Bouncing From Lows, Peripherals Flat To A Touch Tighter, Fitch On Italy Eyed

Weakness in EGBs has started to unwind, with early knee-jerk moves surrounding post-cash close dynamics, Fedspeak and perhaps some worry surrounding this evening’s potential Italian sovereign credit rating update from Fitch waning in recent trade, despite a lack of meaningful headline flow.

• Bunds have bear flattened on the day, with the major benchmarks sitting 1-3bp cheaper.
• BTPs unwind the early widening vs. Bunds during the recent richening, while the remaining 10-Year peripherals have tightened a little vs. Bunds.
• In terms of the Italian sovereign credit rating situation, ECB QT & banking sector TLTRO repayment worries dominate. Next Friday’s potential update from Moody’s will likely garner more interest than today’s potential offering from Fitch, as they already have Italy on a negative outlook, as opposed to the stable outlook at Fitch, while Italy is only one notch above junk at Moody’s vs. two notches above at Fitch.
• ECB speak from Nagel generally reiterated comments he made yesterday, maintaining debate re: the need for tightening beyond the summer break.