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EGB/Gilt: Fresh Growth Concerns Trigger EGB Buying

BOND SUMMARY

The equity slide has dominated this morning with European sovereign bonds also rallying and the US dollar making gains across the board. Today's price action has been underpinned by renewed concerns over global growth in light of another flare up in coronavirus infections (notably in Australia) and yesterday's Fed minutes indicating that the FOMC are preparing to taper asset purchases in the near future.

  • Gilts have outperformed EGBs with cash yields 3-4bp lower across the curve.
  • The bund curve has bull flattened with the 2s30s spread 2bp narrower.
  • OATs have mirrored the move in bunds with yields broadly 1-2bp lower on the day.
  • BTPs have bucked the regional trend (even among the EGB periphery) with prices edging below yesterday's close.
  • Supply this morning came from France (OATs, EUR6.997bn, & OATi/OATei, EUR991mn) and Ireland (ITB, EUR750mn)
  • There were no tier one European data releases this morning. Focus now shifts to US claims data and the latest Philly Fed update for August.
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