Core/Semi-Core Curves Twist Flatter On Mix OF MRO Demand & Risk-Off Flows

The previously outlined moves in equities and oil also allowed the longer end of the core/semi-core EGB curves to firm after the combination this morning’s regional supply and the previously outlined demand for access to the ECB’s MRO facility capped the morning rally at various stages.

• Hawkish musings from the ECB also limited the space this morning.
• Elsewhere, others deemed the latest cuts in the German debt issuance outline to be conservative.
• Bund futures have managed to register incremental fresh session highs in recent trade, although yesterday’s session high remains intact. Cash Bund trade sees 1.5bp of cheapening to 1.5bp of richening as the curve twist flattens.
• Similar degrees of twist flattening have been observed across the remainder of the core/semi-core EGB markets.
• Weakness in the front end of the curves will have been aided by the hawkish ECB tones and MRO dynamics.
• Peripheral spreads are a touch wider on the day, with little in the way of readthrough into BTP spreads in the wake of the MRO demand (which presumably came from smaller Italian banks ahead of tomorrow’s sizeable TLTRO repayments).