Bunds Twist Steepen

Bund futures sit a little above early session lows, after stabilisation in the space fades.

• The contract is -20, while the major German cash benchmarks are 0.5bp richer to 3.5bp cheaper as the curve twist steepens.
• Bund futures have looked through initial firm support (131.70) on a couple of occasions, with bears looking to force a more meaningful break to expose the August 23 low (131.20).
• Most other core/semi-core EGB curves see steepening moves (mix of bear and twist).
• Spreads (including peripherals) vs. 10-Year Bunds are little changed to a touch wider on the day.
• The presence of Austrin supply will have been a background negative for the space, while the impending I/L supply out of Germany will have been less of a mover for conventional paper.
• Schatz ASW registered a fresh multi-month low this morning, with Commerzbank suggesting that “Bund scarcity premiums reflected in swap spreads look set to align more with the cheap levels in repo markets.”
• The latest ECB consumer inflation expectations survey saw a marginal uptick in the 3-Year inflation expectations component, while the 1-Year metric was unchanged. This wasn’t a needle mover for market, but provided another reason not to buy.