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Breaking Lower Amid Bear Steepening

BUNDS

Front Bunds have fallen to fresh August lows at 175.44 - this is through the Aug 27 support at 175.66 and the contract is now testing the 50-day EMA at 175.45.

  • The next level to watch after that is 175.04 which represents trendline support drawn from the May 19 low.
  • Similarly, German 5s30s are nearing the August high (on the 2nd) at 76.9bp (76.3bp last) as the cash curve bear steepens.
  • This looks to be both an inflation (10Y breakevens +0.5bp) and real rates move, appropriate given August eurozone inflation surprising to the upside this morning at a decade-high 3% and ECB hawks Holzmann and Knot talking today about dialling back stimulus.

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