Core Curves Twist Steepen

A bid in equities and the presence of BTP supply kept the post-FOMC rally in core global markets in check during the early rounds of London trade.

• Bund futures unwound an early bid, leaving the contract -15 or so, while the German cash curve sees some light twist steepening as the major benchmarks run 0.5bp richer to 2.5bp cheaper. Core/semi-core EGB curves see similar moves, with spreads vs. Bunds little changed. BTPs are biased a touch wider out to 10s owing to the presence of the supply (digestion of the auctions was smooth enough).
• Gilts also retraced from early session highs, although weakness there has been a little more pronounced, with a lack of meaningful headline drivers observed. That leaves futures -30 or so, while the cash benchmarks run 2bp richer to 3.5bp cheaper, once again twist steepening on the day, with only 2s printing richer vs. closing levels at typing.
• U.S. Tsys have probably been the most resilient post-FOMC. 2bp of richening to 2bp of cheapening is seen across the curve at typing, with twist steepening noted again here. A recent block seller of FV futures (-5K) has applied some pressure.
• The latest ECB monetary policy decision headlines the macro docket today. With a 25bp hike essentially assured, focus will quickly turn to any guidance for policy movements after the summer break (a cumulative ~38bp of tightening is showing on the ECB-dated OIS strip through September).