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Core FI rallies as European equities under pressure ahead of tomorrow's ECB


Yesterday's sell-off in US stocks has filtered through to the European session with European equities down over 1% and leading core global fixed income higher.

  • Treasuries are outperforming gilts and Bunds, with TY1 futures moving back above the 100-dma which was breached yesterday.
  • There have not really been any big headline drivers this morning, with some focus on ECB comments from Holzmann and Vasle published in EUROFI magazine. The comments have only been published today (ahead of tomorrow's ECB meeting) but are likely to have been made some time ago before the ECB blackout period.
  • The main event of the day ahead will be the Treasury Select Committee testimony by the BOE's Bailey, Broadbent, Ramsden and Tenreyro at 16:00BST/11:00ET. With inflation and the labour market the two main discussion points for the MPC, any comments on how these data are seen to be evolving will be closely watched.
  • In the US we will receive JOLTs and the Beige Book while Williams and Kaplan are both due to speak (the latter after the US market close).
  • EGB supply has been a bit lighter this morning (Green Bund, UK linker, Slovenia) but EUR corporate issuance remains heavy. Focus will switch to the 10y UST note auction later today.
  • TY1 futures are up 0-5 today at 133-05 with 10y UST yields down -2.4bp at 1.350% and 2y yields down -0.6bp at 0.215%.
  • Bund futures are up 0.15 today at 171.77 with 10y Bund yields down -1.0bp at -0.333% and Schatz yields up 0.1bp at -0.705%.
  • Gilt futures are up 0.13 today at 128.18 with 10y yields down -0.8bp at 0.728% and 2y yields up 0.1bp at 0.191%.

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