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EGB/Gilt - Watch the Gilt/Bund spread

BONDS
  • EGBs and Bund remains under pressure once again today.
  • Rate traders continue to price more aggressive hikes from the ECB, which has helped longer dated bonds lower.
  • Desks have also favoured positioning for a Hawk Powell this Friday. Bund has so far found some support at 150.00, but better is seen at 149.87, which equates to 1.4% in 10yr Yield.
  • Peripherals are mostly wider, but in small at the time of typing.
  • Italy leads by just 1.7bp, and Greece is flat against the German 10yr.
  • Watch the Gilt/Bund spread, cleared out the small resistance that was 128.9bps earlier, and now eye 133.16bps, the March and 2022 high, and also the widest print since 28th April 2016.
  • Spread is at 131.2bps (6.1bps wider).
  • Volumes in Gilt are dominated by spreads, first notice is on the 30th, but UK have a Monday Bank holiday, and investors will likely favour doing the majority by the weekend.
  • Half the front month volume is spread related, roll pace stands at 30%
  • Looking ahead, tomorrow sees German final GDP, US (2nd) GDP, and Core PCE.
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