Early Sell Off Moderates After Bears Probe Round Numbers/Tech Support

Momentum from Tsys in Asia-Pac hours spilled over in the early rounds of London trade, with a fresh wave of cheapening pressure seen.

• Still, bears couldn’t hold the move above 3.00% in German 10-Year yields (last 2.96%), nor the move above the 5.00% mark in 30-Year Tsys (last 4.93%). Technical support in gilt futures held.
• The failure of bears to consolidate moves through round numbers, coupled with the scale of the recent cheapening and lack of meaningful headline flow, allowed bonds to rebound from worst levels.
• Lighter net long positioning in Tsys (as outlined by the latest J.P.Morgan client survey) may give some scope to add to longs when such round numbers (roughly) hold, while the usual talk of profit taking also does the rounds given the speed and scope of the recent moves.
• A block buy in TY futures also helped the stabilisation.
• The German curve twist flattens on the day, while gilts and Tsys twist steepen.
• Bund, gilt & TY futures operate comfortably off session cheaps.
• EGBs are little changed to a touch wider vs. Bunds.
• Comments from ECB President Lagarde and BoE Governor Bailey failed to add to the respective policy debates.