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ECB Lagarde drives spread tighter

BONDS
  • Another volatile start for Govies and Rate markets.
  • Bund trades in a 224 ticks range, and nearly reached level where it was trading yesterday on the cash open, at circa 145.01, printed a 144.80 high.
  • Bund fell all the way back down to 142.67, and now at 144.50 at the time of typing.
  • Most notable flows is in peripheral spread, driven by ECB Lagarde's comment last night, telling Ministers that the ECB expects to put limits on Bond spreads.
  • In turn, Greece and Italy trade 21.8 and 13.4bps tighter respectively versus the German 10yr, with BTP falling all the way down to 188.4bps.
  • Gilt initially outperformed and pushed the Gilt/Bund spread to its tightest level since September 2020.
  • But the pull back higher in Bund led by BTP, has brought back the Gilt/Bund spread 2.4bps wider now.
  • It was a decent overnight session for Treasuries, with Tnotes trading 220k lots pre European cash open, and now over 400k lots traded. Treasuries are also in Green territory taken their cues from Europe, and some of the divergence has brought back the Tnote/Bund spread wider, by 8.4bps, after the spread tested the tightest level since December 2020 yesterday.
  • Looking ahead, there are tier data for the session, focus will be on Equity expiry, expect some volatility at 14.30BST/09.30ET.
  • Remaining speakers are Fed Powell making welcoming remarks at Dollar Conference, and BoE Pill at a BoE workshop on household finance and housing.
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