Curve Now Twist Steepens As Short End Bounces

The short end has led the move away from session cheaps in what has been a fairly sharp turnaround. 2s previously registered a fresh cycle high in yield terms, but now sit 10bp or so richer on the day, with BoE-Dated OIS terminal pricing closer to 6.20% in policy rate terms after flirting with 6.30% earlier today.

• Italian CPI data and the general trajectory of wider core global FI was seemingly the driving force, given the lack of domestic factors, although the short end of the Gilt curve outperforms German equivalents, while the long end lags.
• Smooth digestion of the latest DMO auction wouldn’t have dented the richening theme.
• Futures sit just off best levels, last +60 or so on the day, while the cash benchmarks see 11bp of richening to 1bp of cheapening as the curve twist steepens.
• The 2-/10-Year curve has pulled off this morning’s inverted cycle extremes.
• BoE’s Pill offered little in the way of actionable commentary, with focus on BoE Governor Bailey’s latest appearance, scheduled for this afternoon.