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EGBS: Bund Futures Off Session Highs As Euro Equities Find A Base

EGBS
BulletEurozoneFixed Income BulletsMarkets

Bund futures are +29 ticks at 131.70, off earlier session highs as European equities find a short-term base. The downtick in crude oil futures is somewhat offset by a ~3% rally in natural gas, limiting the feedthrough into core EGBs.  

  • The 10-year OAT/Bund spread has widened back to ~74bps after reaching a low of 72bps earlier. Markets are digesting a rift between the Socialists and the government, following PM Bayrou’s comments around immigration yesterday.
  • German cash yields are 2-3bps lower across the curve. E4.5bln of the 10-year 2.50% Feb-35 Bund was sold this morning.
  • Eurozone lending to households and firms accelerated in December, in a signal that ECB policy rate cuts are continuing to be fed through the real economy.
  • 10-year peripheral spreads to Bunds have tightened alongside the equity rally.  The 10-year BTP/Bund spread has fully retraced the widening seen into yesterday’s close, now ~2.5bps tighter at ~107bps. Yesterday’s widening came on news that PM Meloni has been placed under investigation in a case relating to the repatriation of a Libyan police officer.
  • Broader global focus turns to the BoC and Fed decisions later today, before the ECB decision tomorrow (a 25bp cut remains essentially fully priced in ECB-dated OIS).
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Bund futures are +29 ticks at 131.70, off earlier session highs as European equities find a short-term base. The downtick in crude oil futures is somewhat offset by a ~3% rally in natural gas, limiting the feedthrough into core EGBs.  

  • The 10-year OAT/Bund spread has widened back to ~74bps after reaching a low of 72bps earlier. Markets are digesting a rift between the Socialists and the government, following PM Bayrou’s comments around immigration yesterday.
  • German cash yields are 2-3bps lower across the curve. E4.5bln of the 10-year 2.50% Feb-35 Bund was sold this morning.
  • Eurozone lending to households and firms accelerated in December, in a signal that ECB policy rate cuts are continuing to be fed through the real economy.
  • 10-year peripheral spreads to Bunds have tightened alongside the equity rally.  The 10-year BTP/Bund spread has fully retraced the widening seen into yesterday’s close, now ~2.5bps tighter at ~107bps. Yesterday’s widening came on news that PM Meloni has been placed under investigation in a case relating to the repatriation of a Libyan police officer.
  • Broader global focus turns to the BoC and Fed decisions later today, before the ECB decision tomorrow (a 25bp cut remains essentially fully priced in ECB-dated OIS).