Core EGBs and Gilts Slightly Cheaper

Core EGBs and Gilts sit flat to a touch cheaper this morning, as better-than-expected German IFO numbers do not provide much impulse in either direction.

• Australian CPI upside surprise as well as Country Garden's USD bond default (largely anticipated) will have provided pressure early on, and impending supply from Italy, Germany and the UK also provided headwinds.
• OATs underperform, with cash benchmarks flat to 1-3bps cheaper, while cash Bunds are 0-2bps cheaper across tenors.
• The UK 2s10s curve is seen twist flattening almost 2bps today, currently at -25.5bps. Gilt futures sit at 92.76, and currently sit at the 200-day EMA of 92.74. The Oct 24 high of 93.34 as the first resistance and the Oct 24 low of 92.44 the first support.
• Periphery spreads are seen mixed, with the 10-year BTP/Bund spread 2.3bps wider at 202.1bps and Spain/Bund spreads 0.8bps wider at 111.8bps. Aforementioned Italian supply will have provided pressure here, while earlier Spanish PPI did not move the needle. Greek and Portuguese spreads are 3bps and 0.4bps tighter respectively this morning.
• The remaining data calendar is light today, with no scheduled MPC and ECB speakers. The BoC decision and US new home sales are the highlight in the North American session.