Curves Bull Steepen On ECB Speak & BoJ Tweak, German CPI Data Eyed

Bund futures hover just shy of best levels of the day into German national CPI data, last showing +20 or so, while the major German cash benchmarks run 1-4bp richer as the curve bull steepens, as wider curve dynamics are driven by some of the hawkish leaning ECB members providing a softer view when it comes to the need for further rate hikes and the BoJ’s YCC tweak overnight. ECB terminal rate pricing has moderated to ~3.90% as a result, with yesterday’s dovish extremes, breached at the margin.

• The remainder of the core/semi-core EGB space lag Bunds at the margin (with bull steepening also seen on those curves), while the latest leg of richening also leaves peripherals little changed to a touch wider on the day, as the general trend of early Friday tightening is reversed.
• A quick reminder that our calculations estimate that national CPI rose by +0.27% m/m and by +6.17% Y/Y. This is based on the published index values for available state data. The data implies readings broadly in line with expectations, rounded to 0.3% m/m and 6.2% y/y.