Bunds Bull Flatten, BTPs Outperform

Bund futures only managed a brief and limited foray above 131.00, before fading from best levels to trade +35 last.

• The major German cash benchmarks sit 1.5-3.5bp richer as the curve bull flattens.
• Cross-asset moves have been eyed, with tech stocks leading a bid in equities and the USD on the defensive.
• Italian paper outperforms European peers early on Tuesday.
• This comes despite BBG sources suggesting that “Italy may slow down its deficit-reduction plans after the economy unexpectedly shrank,” in a report published late on Monday.
• The remainder of the major EGB spreads that we monitor (vs. 10-Year Bunds) are little changed, trading within 1bp of Monday’s closing levels.
• Liquid ECB-dated OIS contracts ease by 0.5-1.5bp.
• The regional data docket and central bank speaker slate is virtually non-existent for the remainder of Thursday’s session.
• We are still on the lookout for the latest round of issuance from the EFSF.