Curves Lean Steeper, With Gilts Outperforming

Global core FI has bounced from lows set in early European trade, with Gilts outperforming. Futures are trading within last week's ranges.

• Core FI began coming under pressure in Asian trade after China held the 5-Year LPR steady at 4.20% (vs 15bp cut expected), with 1-Year LPR cut 10bp (vs 15bp cut expected). We note that while there have been some outsized price movements this morning, they have come on low volume.
• The German and US curves have bear steepened while the UK's is bull steepening - the latter curve's outperformance looking like a pullback after last week's selloff. Periphery EGB spreads are a little tighter, led by Italy - Corriere reporting Italian banks could get future tax credits on windfall profit taxes.
• The only data of note on Monday's calendar is German producer prices which were more deflationary than expected (see our note here) but had little market impact. While we get some 2nd tier data Tuesday, most attention this week is on Wednesday's flash Aug PMIs.
• The Fed's Jackson Hole conference is the week's key event, with announced speakers so far including Chair Powell and ECB Pres Lagarde on Friday. There are no central bank speakers of note, and the only bond supply today is Belgian OLOs.

Latest levels:

• Sep US 10Y futures (TY) down 6/32 at 109-14.5 (L: 109-09 / H: 109-22)
• Sep Bund futures (RX) down 24 ticks at 131.17 (L: 130.97 / H: 131.41)
• Sep Gilt futures (G) up 20 ticks at 92.11 (L: 91.58 / H: 92.14)
• Italy / German 10-Yr spread 2.9bps tighter at 167.8bps