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Core/Semi-core A Touch Firmer And Peripheries Wider; ECB Eyed On Thursday

EGBS

Core/semi-core EGBs see a fairly muted start on Monday, with markets looking ahead to the main domestic and global catalysts later in the week.

  • BoJ headlines re: not abandoning negative rates in December prompted an initial knee-jerk upwards in JGB futures but spillover into the EGB space was fairly limited.
  • That leaves Bund futures up 0.09 ticks today at 134.77, towards the low-end of Friday's range post US labour market data. OAT futures sit similarly, while German/French yields are seen 1.0 - 2.5bps lower with 2s10s curves bull flattening.
  • Peripheries are a touch wider to Bunds, with GGBs the main laggard - the 10-year GGB/Bund spread is 1.2bps wider at 118.0bps.
  • Today's docket is very light, with no notable data to flag. Focus remains on the ECB decision on Thursday, where any talk on PEPP reinvestment/pushback on rate cut pricing are the main areas of interest.
  • There will also be residual interest on the progress of the EU fiscal rules negotiations, after finance ministers failed to agree a deal on Friday. Headlines re: the 2024 German budget will also be closely watched.

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