Bull Flattening As Bank Concerns Resurface

Core FI has strengthened in European trade Tuesday morning, with weaker equities overnight setting a risk-off tone.

• Bull flattening is evident across curves, with cash Bunds and Gilts marginally outperforming Treasuries.
• A sharp post-results drop for beleaguered First Republic shares have translated into bank weakness early Tuesday (eg Euro financials -1.3% vs -0.5% for Eurostoxx 600), dragging down risk appetite.
• Largely 2nd tier data this morning but it's had a bullish impact for bonds, particularly the first deflationary Spanish Y/Y PPI figure since 2020.
• BoE's Broadbent did not comment on current monetary policy in a speech this morning.
• A few US data points of interest later today, including new home sales, Conference Board consumer confidence, and Richmond Fed manufacturing.
• The US supply highlight is the $42B 2Y Note auction.

Latest levels:

• Jun US 10Y futures (TY) up 17/32 at 115-13 (L: 115-01 / H: 115-14)
• Jun Bund futures (RX) up 42 ticks at 134.11 (L: 133.51 / H: 134.4)
• Jun Gilt futures (G) up 29 ticks at 101.21 (L: 100.95 / H: 101.4)
• Italy / German 10-Yr spread 1.5bps wider at 188.7bps