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ECB Schnabel's Dovish Comments Prompt Core/Semi-core Firming; Peripheries Tighten

EGBS

Core/semi-core EGBs are off intraday highs but remain firmer on the back of dovish-leaning comments from ECB Board member Schnabel before the European cash open.

  • Schnabel noted that “the most recent inflation number has made a further rate increase rather unlikely”, which reads dovishly given her typically hawkish leanings. For more, see MNI Fixed Income Bullets @06:49 AM GMT.
  • Drivers for the move away from firmest levels include the uptick in Brent futures and firm pricing components in the November round of Eurozone services PMIs. 1/3-Year ECB consumer inflation expectations were also seen unchanged at 4.0% and 2.5% Y/Y respectively.
  • The Dec '23 Bund contract currently sits 0.35 ticks higher on the day at 133.80, off highs of 134.17.
  • Yields on German cash benchmarks trade 4-5bps lower on the day, with the impending Schatz auction weighing at the short-end. OAT yields are similarly 4-5bps lower.
  • Peripheries are seen tighter to Bunds, led by Italy, despite Schnabel re-upping Lagarde's comments that PEPP reinvestments would be discussed in the "not-too-distant future".
  • The remainder of the European docket is light, with main focus on ISM services and JOLTS data out of the US this afternoon.

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