Early Cheapening Impulse Fades, GGBs Tighten Post-Supply

The UK CPI-derived cheapening impulse has faded, with the recovery from session cheaps in Gilts and a tick away from session highs in ECB terminal rate pricing (which briefly showed above 4.00% in deposit rate terms before the Gilt recovery and comments from ECB Governing Council member Kazimir applied light pressure), as well as the average demand at the latest round of long end supply, at the fore for Bunds.

• That leaves the major German cash benchmarks 1.5bp cheaper to 2.5bp richer as the curve twist flattens, while Bund futures are back to -10 on the day, after showing back above unchanged.
• Wider core/semi-core EGB curves have also flattened, while peripherals are more mixed.
• Well-received Greek supply, aided by expectations surrounding this impending second round of national elections, was noted, with the 10-Year GGB/Bunds Spread hovering just above cycle tights.
• Elsewhere, the remaining major peripheral 10-Year spreads are 1-2bp wider, with the uptick in ECB-dated OIS not helping, although we are back from session extremes in peripheral wides owing to spill over from the GGB post-auction momentum and the tick back from highs in ECB-dated OIS.