Core FI Off Best Levels, Tight Ranges Seen

Core global FI markets hold off best levels of the day.

• A quick reminder that dovish snips provided by ECB Governing Council member Kazaks, via a presentation to MNI, along with late Tuesday BBG source speculation re: tighter EU fiscal rules, supported EGBs during early trade.
• Still, we saw a retrace from best, with bulls only managing a brief and shallow breach of technical levels in German Bunds (in both futures and yields).
• This was probably (in part) owing to a reassessment of the degree and speed of ECB rate cuts that was priced (150bp for ’24 at one point, i.e. 6x 25bp cuts out of 8 meetings due to be conducted in ’24).
• German paper runs -1/+1bp vs. closing levels, twist steepening.
• EGBs are generally a little wider vs. Bunds on the session after tightening around Kazaks’ comments. Greece is the exception, remaining ~2bp tighter on the day.
• The Tsy curve has seen some light bear flattening, with pre-NY block trade in TU futures and flattener curve plays helping bias the curve that way. Yields are 2-3bp higher.
• Gilts also bear flatten, with yields little changed to 3bp higher. Supply dynamics applied some light and limited pressure at various points of the morning.