Bunds Back towards Early Cheaps, BTPS Widen, GGBs Tighten

Bears have failed to challenge the early Wednesday low in Bund futures on the latest move lower, at least for now, with that contract last showing flat on the day. The wider Bund curve maintains the twist flattening pressure outlined earlier, as do the remainder of the core/semi-core EGB curves.

• The chunky € sovereign & IG supply slate was the key driver behind the early move cheaper, as the Asia-Pac bid in Bunds unwound, with little support coming from a softer than expected M/M German industrial production print.
• BTPs maintain their early underperformer status, operating ~4bp wider on the day at the 10-Year point, a touch shy of session extremes. A quick reminder that retail demand for the BTP Valore has been solid/strong, with the Italian Treasury flagging further issuance via that channel later in ’23.
• Greeks 10s are now 3bp tighter vs. Bunds, with some attention perhaps turning to Friday’s potential sovereign credit rating review of Greece from Fitch.
• ECB’s Schnabel & Makhlouf have stuck to their respective scripts, while alluding to the need for further tightening. Elsewhere, ECB’s Knot once again wouldn’t be drawn on policy preferences beyond the summer break, as he underscored the need for further interest rate hikes.