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EGB/Gilt: Twist Steepening

BOND SUMMARY

Euro area government bond curves have twist steepened in the wake of yesterday's FOMC decision where policymakers doubled down with another 75bp hike. Regional equities and FX, meanwhile, trade mixed.

  • Regional German CPI data for July broadly show a deceleration from the previous month. Elsewhere, Eurozone economic, industrial and service confidence all deteriorated further in July.
  • In an interview published by Politico yesterday evening, the ECB's Ignazio Visco stated that the decision to adjust policy rates will depend on "the developments in prices and in the real economy, because the real economy affects prices" and that "what we see in the real economy, certainly it is not terribly encouraging".
  • Gilts initially opened lower but recovered some of the earlier losses. Cash yields are now 1-4bp higher on the day with the longer-end of the curve underperforming.
  • The bund curve has twist steepened with the 2s30s spread 9bp wider
  • The OAT curve has similarly twist steepened with the 2s30s spread widening 8bp.
  • BTPs have traded broadly in line with core EGBs.
  • Supply this morning came from Italy (BTPs/CCTeu, EUR7.5bn)
  • Focus now shifts to the first estimate of US GDP for the second, which is published later today.
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