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EGB/Gilt: ECB & UK Autumn Budget In Focus This Week

BOND SUMMARY

European government bonds have traded mixed this morning, mirroring the uneven trading in FX.

  • Gilts have traded a touch weaker with the belly of the curve marginally underperforming. Cash yields are broadly 1-2bp above the Friday close.
  • The bund curve has steepened on the back of the short-end firming and longer end yields pushing higher. The 2s30s spread has widened by 5bp.
  • Trading in OATs have played out in a similar fashion with the curve 3bp steeper.
  • BTPs have inched higher with cash yields broadly 1bp lower.
  • The German IFO report for October came in mixed with the current assessment reading coming in slightly better than expected while the expectations and business climate components were weaker than expected.
  • Supply this morning came from Germany (Bubills, EUR2.03bn allotted) and the EU(NGEU , EUR2.497bn). Later today France will offer EUR5.4-6.6bn) of BTFs.
  • Focus this week will be on the ECB GC meeting, which is not expected to produce any new policy decisions, but is likely to see President Lagarde push back against the recent hawkish shift in market rate expectations. Before then, the UK Autumn budget on Wednesday comes into focus with the better than expected economic performance providing the Chancellor of the Exchequer more room to manoeuvre.

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