Bund & Gilt Curves Bear Flatten

Bund and gilt futures are off Asia/early London highs, with European equities on the front foot on the back of feedthrough from Monday’s Fedspeak and hope re: fresh Chinese stimulus. Elsewhere, oil prices have recovered from session lows alongside the rally in European equities.

• Supply also provides some background pressure for EGBs, with the books on the latest EU syndication now closed.
• I/L supply out of Germany and the UK wouldn’t have been a meaningful mover for conventional paper.
• Bund futures last show -10 or so, with the German cash benchmarks sitting 1-4bp cheaper, bear flattening.
• EGB spreads to Bunds are generally a tighter after widening on Monday, with BTPs outperforming (aided by the recovery in equities), albeit consolidating the bulk of the well-documented spread widening seen in recent weeks. The exception to the trend is Portuguese & Greek 10s, which sit 0.5-1bp wider vs, Bunds.
• Gilts bear flatten, with futures +15 and cash gilts running 1-5bp cheaper. Lower tier local data won’t have moved the needle for markets, while BoE MPC member Mann stuck to the hawkish side of the spectrum late on Monday.