Day ahead

The morning session sees only Italian retail sales released with the real focus tomorrow's ECB meeting and on the BOE members who are testifying ahead of the Treasury Select Committee.

• After some initial weakness on the open, Bunds and Treasuries are now largely in line with yesterday's close with little movement in peripheral spreads.
• Note that TY1 traded to a low of 132-28+ yesterday which will form the initial support, ahead of the August 26 low of 132-25+ and the key support at the August 11 low of 132-21+.
• Governor Bailey, Broadbent, Ramsden and Tenreyro all due to testify before the Treasury Select Committee at 16:00BST this afternoon. With inflation and the labour market the two main discussion points for the MPC, any comments on how these data are seen to be evolving will be closely watched.
• Tomorrow's ECB meeting remains the focus for the market outside of the UK. Our baseline scenario sees the ECB announces a modest reduction in the PEPP pace for Q4 and stresses that this is a technical implementation decision and not a taper signal. Growth and inflation forecasts are revised higher to reflect the recent data improvements, but the medium-term inflation projection remains below target.
• TY1 futures are up 0-2 today at 133-02 with 10y UST yields down -1.2bp at 1.362% and 2y yields down -0.4bp at 0.217%.
• Bund futures are up 0.01 today at 171.63 with 10y Bund yields down -0.1bp at -0.324% and Schatz yields up 0.4bp at -0.702%.