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EGB/Gilt - US CPI beat and BoC drive Govies

BONDS
  • EGBs and Bund fell this afternoon, following the US CPI beat and Bond, also saw another round of selling after the Bank of Canada raised rates more than expected, by 100bps vs the 75bps expected.
  • US CPI: Core goods prices continue to bounce back (+0.8% M/M, highest since January, +0.7% prior), while core services picks up after a brief lull (+0.7%, +0.6% prior).
  • Shelter continues to be a huge inflation driver, and had been seen by consensus as cooling vs a particularly strong May. That clearly didn't happen: Owner equivalent rent hit a fresh post-1990 high in month/month terms (+0.70% M/M, +0.60% prior), while rent of primary residence prices rose by the fastest since 1986 (+0.78%, +0.63% prior).
  • June saw several key pandemic-related components of CPI fading. Travel-related categories had been seen softening in June by most analysts, though there was a mix of opinions on how much used/new cars would soften.
  • Bonds are nonetheless off their lows at the time of typing, as desks cover, as we head towards the later stage of the European session.
  • Peripherals are again mixed today, with Greece is 6.3bps tighter, and Italy 4.7bps wider.
  • Gilt outperforms Germany, and the gilt/Bund spread trades well within ranges.
  • Looking ahead, Bank of Canada's Macklem Speaks to Reporters After Decision.
  • Tomorrow, sees Sweden CPI and US PPI.
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