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MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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Free AccessCheaper, Bunds Unwind ECB Rally & Peripherals Widen
The early morning hawkish sources report re: the ECB from the FT (‘ECB hawks warn of December rate rise if inflation and wages stay hot’) applied pressure to Bunds, with the contract only really finding a base in recent trade, as the EURIBOR strip ticks away from worst levels.
- The usually hawkish ECB Governing Council member Muller indicated that he doesn’t expect further rate hikes in the coming months, while noting that higher-than-expected inflation levels could generate the need for another hike.
- ECB-dated OIS terminal rate pricing is unchanged on the day, but there has been a modest unwind of some of the pricing of cuts seen in ’24.
- Bund futures ~20 ticks above yesterday’s low, with the ECB-derived rally unwound.
- German cash benchmarks 4-5bp cheaper.
- Core/semi-core EGB curves see similar moves.
- The sources piece and this morning’s outright cheapening seems to have been enough to trigger some re-widening in peripheral spreads, with BTPs and GGBs seeing the largest moves (+2.5bp vs. Bunds). Yesterday’s dovish hike, which signalled a likely end to the hiking cycle, and lack of movement on the PEPP front promoted peripheral compression post-ECB.
- Various peripheral political figures have expressed unease with the latest ECB rate hike.
- Elsewhere, a late Thursday BBG source piece suggested that the Italian PM and Finance Minister are “increasingly aware of the impact that a wider-than-announced deficit could have on bond yields and the ability to finance new measures,” suggesting they are seeking to reassure investors that Italy’s finances are under control.
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.