Curves Bear Steepen, Spreads To Bunds Widen

Bears sold into the overnight/early European rally in Bund futures, even with oil trading on the defensive once again.

• Supply-related hedging pressure introduced some fresh cheapening to the space.
• This comes as wider core global FI metrics come under renewed pressure after yesterday’s relief rally.
• Comments from ECB’s Kazimir haven’t seen a meaningful market reaction, as he reiterated his hope that September’s rate hike was the last of the cycle. He also noted the Bank’s data-dependent stance by stressing the need to see the Bank’s economic projections in December and March. Finally, Kazimir believes that the Bank shouldn’t alter the PEPP reinvestment timetable.
• Bund futures moved back into the confines of yesterday’s range after a look above, last showing little changed.
• German cash benchmarks are 1-5bp cheaper as the curve bear steepens.
• EGBs are generally little changed to wider vs. Bunds, with decent enough demand in both the Spanish and French auctions doing little for SPGBs and OATs in spread terms.
• BTPs widen back towards the 200bp mark vs. 10-Year Bunds, with equities on the defensive, outright cheapening and CDX widening observed. A quick reminder that Italian Finance Minister Giorgetti played down the risk of sovereign credit rating downgrades after hours on Wednesday.