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(X1) Bullish Risk Remains Present


Broader base USD selling going through

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European government bonds initially traded weaker soon after the open, before then paring losses and trading above yesterday's close.

  • The gilt curve has bull steepened with the 2s30s spread 1bp wider.
  • UK public borrowing data came in better than expected for May (PSNBR GBP23.6bn vs GBP25.5bn expected) as the economic recovery gains ground, although the government is still looking into ways to bolster public finances with the Telegraph yesterday reporting that officials are looking into potential pension tax reforms.
  • Following the initial selling, bunds are now back to unch on the day with the curve flat overall.
  • OATs have mirrored the move in bunds with cash yields broadly 1bp lower.
  • Spain launched EUR8bn of a 10-year bond while the Netherlands sold EUR1.96bn of the 4.00% Jan-37 DSL.