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Bunds And Gilts Ignore Soft PMI Readings

BONDS

The week has begun with a risk-on tone with European cash curves bear steepening amid stronger equities, though the US curve is fairly flat to start the week.

  • August flash PMIs in Europe have been largely disappointing vs expectations and have pointed to slowing economic momentum in 3Q. The US reading is the sessions' remaining data highlight (0945ET/1445BST).
  • That has not benefited core FI though. Bunds have pulled back fairly sharply despite a weaker-than-expected German manufacturing PMI reading; RXU1 futures have broken below 176.85, with next support at 176.68. Likewise Gilts are weaker despite a large services PMI miss.
  • Periphery EGB spreads are mixed, with Italy underperforming.
  • The only supply today is bills (Germany, France, US), and no central bank speakers scheduled, with the Fed's Jackson Hole summit eyed later this week.

Latest levels:

  • Sep US 10-Yr futures (TY) down 3/32 at 134-01 (L: 133-31.5 / H: 134-06)
  • Sep Bund futures (RX) down 39 ticks at 176.76 (L: 176.66 / H: 177.16)
  • Sep Gilt futures (G) down 25 ticks at 130.04 (L: 129.97 / H: 130.27)
  • Sep BTP futures (IK) down 49 ticks at 154.84 (L: 154.75 / H: 155.33)
  • Italy / German 10-Yr spread 1bps wider at 105.1bps
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