Bunds Twist Steepen, Greek Compression Noted Ahead Of Tomorrow’s Fitch Review

The recovery in crude oil prices helped cap the morning move away from session cheaps in EGBs, before the recently released U.S. IJC data revealed a larger than expected uptick, putting a fresh bid into bonds, while oil has nudged back from session best. Spill over from hawkish SNB speak had a modest impact before the IJC-inspired move.

• Twist steepening Is apparent on the Bund curve, where the major benchmarks run 2bp richer to 1bp cheaper, with only 30s softer on the day. Similar moves are seen across the French and Dutch curves.
• Meanwhile, peripherals tighten vs. Bunds at the 10-Year point, with Italy eating away at the widening impulse seen in recent days, perhaps aided by the well-documented round of strong demand for the BTP Valore from the Italian retail base (although there are varying views on what that means for benchmark BTPs, as outlined earlier).
• Greek paper leads the tightening again, with that spread compressing by 5bp. As we noted yesterday there could be increasing market focus on the potential for some form of good news via tomorrow’s potential rating update from Fitch on Greece. The spread has compressed below 130bp, leaving it on target to lodge a fresh cycle tight on a closing basis.