Bunds underperform

After a quiet start to the day, we saw huge moves on the back of a Bloomberg sources story that stated the EU could agree as soon as this week to start a common EU issuance programme to raise funds for energy and military purposes. This would reduce the risks to inflation (through limiting consumer energy prices) and reduce the possibility of stagflation. We discuss the market reaction and implications in more detail here.

• Euribor Reds have seen the biggest moves of the day followed by SONIA futures. The Eurodollar strip is also lower on the day and has seen some steepening as far out as Blues.
• A similar story is seen in bond markets with Bunds underperforming gilts and Treasuries. The German curve, however, has seen more of a parallel move while gilts have bear flattened and Treasuires bear steepened. At the time of writing 10-year BTP-Bund spreads were 12.8bp tighter on the day, GGB-Bund 15.3bp tightenm Portugal and Spain around 8bp tighter and even OAT-Bund is 4.1bp tighter.
• TY1 futures are down -0-22+ today at 127-13 with 10y UST yields up 5.5bp at 1.831% and 2y yields up 4.1bp at 1.593%.
• Bund futures are down -1.04 today at 165.63 with 10y Bund yields up 8.0bp at 0.061% and Schatz yields up 8.0bp at -0.619%.
• Gilt futures are down -0.66 today at 124.00 with 10y yields up 5.6bp at 1.359% and 2y yields up 6.6bp at 1.228%.