Cheaper Again, But Off Worst Levels

Asian impulses and hawkish reiterations from ECB’s Holzmann & BoE’s Pill helped core global FI lower early on Friday.

• Modest misses were seen in the German ifo data, although the President of the body noted that the German economy has probably moved beyond the depths of the economic downturn, while expressing worry re: the fiscal situation.
• Recent comments from ECB President Lagarde reiterated the degree of caution that the ECB holds re: further immediate progress on inflation, alongside a re-flagging of the distance already travelled on that front.
• EUR 5y5y inflation swaps have extended their bounce from recent multi-month lows, which will have provided some background pressure for bonds.
• Bund futures found a bit of a base around intermediate support before recovering from lows.
• The contract last shows -30, at 130.25, ~15 off the low of its ~50 tick range. German benchmark yields are 2-3bp firmer on the day, light bear steepening seen.
• EGB spreads to Bunds are typically a touch tighter.
• Gilts have breached another technical support level, although the move ran out of steam before bears could get anywhere near a key support zone (94.84/58, the 50-day EMA /Nov 13 low). The contract last prints -55 around 95.40, ~35 ticks off lows.
• Cash gilt yields sit 0.5-4.0bp higher on the day, with the curve bear steepening. SONIA futures and BoE-dated OIS have seen some hawkish moves post-Pill, but haven’t tested yesterday’s extremes.
• ECB speak from de Guindos and de Cos is due later in the day, with the highlight from a Thanksgiving-thinned/curtailed session set to come in the form of the flash U.S. S&P Global PMI readings.