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Core FI rally continues (but peripheral spread tighten)

BOND SUMMARY

The rally in core fixed income has continued this morning despite the 5.0% US CPI print yesterday.

  • The moves are biggest in gilts where 10-year yields are down 5bp at the time of writing. Concerns that the easing pencilled in for June 21 is weighing on sentiment while the market is also concerned about the EU-UK dispute surrounding the Northern Ireland protocal.
  • Bunds are higher on the day but peripheral spreads are also narrowing as the market shows its relief that the ECB will continue buying bonds at a significantly faster pace than through Q1.
  • Michigan confidence is the only noteworthy calendar item today.
  • It will be interesting to see how markets close the week, with many citing the moves this week as a positioning clear-out.
  • TY1 futures are up 0-5+ today at 133-03+ with 10y UST yields up 0.3bp at 1.436% and 2y yields down -0.2bp at 0.144%.
  • Bund futures are up 0.54 today at 173.07 with 10y Bund yields down -2.5bp at -0.282% and Schatz yields down -0.2bp at -0.692%.
  • Gilt futures are up 0.60 today at 128.29 with 10y yields down -5.0bp at 0.696% and 2y yields down -1.3bp at 0.047%.
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