Bunds Weaker On Wider Cues, BTPs Tighter Post-Fitch Update

The Bund curve has bear steepened on, with the brisk pace of €IG corporate issuance picking up further, limiting rallies, after an extension lower early on (with the latter aided by broader developments and breaks of recent intraday lows in Bund futures). The major cash benchmarks sit little changed to 2bp cheaper, while the major futures contracts are lower on the day, off early cheaps.

• BTPs now trade richer across the curve, shaking off the initial spill over from weakness in wider core global FI markets, intermediates outperform. The early tightening bias vs. Bunds after Friday’s ratings affirmation from Fitch gets more traction (also triggering outright richening), with the 10-Year spread compressing further to sit ~4bp tighter on the day, operating closer to 185bp than 190bp. This comes alongside various sell-side reports playing down the likelihood of ratings action from Moody’s this coming Friday (where Italy currently holds a one-notch above junk status rating, with negative outlook).
• The latest raft of economic projections from the European Commission saw small marks higher in the GDP & CPI forecasts covering the next couple of years, while mixed tones on the German economic outlook from the country’s Economy Ministry did little for the space.