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BONDS: EGBs & Gilts Off Lows, GGB Outperformance Extends

BONDS
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Swelling €IG supply and EGB syndications continue to weigh on EGBs, with the halt of the ECB’s PEPP reinvestments also a background negative in early ‘25.

  • Softer-than-expected French and Italian CPI meant that Eurozone CPI data matched expectations, negating the upside risks provided by Monday’s German reading.
  • Bund futures -4 at 132.22 vs. lows of 123.13, yesterday’s range intact.
  • German yields flat to 3bp higher, curve steepens. 2s10s and 5s30s remain below cycle highs.
  • EGB spreads to Bunds little changed to ~1bp wider in the main, OATs under the most pressure.
  • The exception comes via GGBs, which continue their run of early ’25 outperformance. GGB spreads to Bunds and OATs on for fresh cycle closing lows (~75bp and -5bp, respectively).
  • A conservative PDMA issuance target factors into early ’25 GGB tightening.
  • ECB-dated OIS little changed to a couple of bp more dovish, showing 101.5bp of cuts for ’25, with a 25bp cut later this month near fully discounted.
  • Gilt futures -25 at 91.70 vs. lows of 91.68. Initial support at 91.64 untested.
  • Yields 2-3bp higher, curve steeper.
  • 10s as high as 4.645%, Dec high at 4.651%. Spread to Bunds 2bp wider at 218bp.
  • The presence of 30-Year gilt supply weighed on gilts in early trade.
  • 30-Year gilt yields hit the highest level seen since 1998 ahead of the auction.
  • The auction was taken down smoothly, which allowed UK paper to stabilise.
  • Issuance should dominate locally, with no major European & UK risk events scheduled through the close.
  • Elsewhere, U.S. ISM services & JOLTS data due later, Fedspeak from Barkin also slated.
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Swelling €IG supply and EGB syndications continue to weigh on EGBs, with the halt of the ECB’s PEPP reinvestments also a background negative in early ‘25.

  • Softer-than-expected French and Italian CPI meant that Eurozone CPI data matched expectations, negating the upside risks provided by Monday’s German reading.
  • Bund futures -4 at 132.22 vs. lows of 123.13, yesterday’s range intact.
  • German yields flat to 3bp higher, curve steepens. 2s10s and 5s30s remain below cycle highs.
  • EGB spreads to Bunds little changed to ~1bp wider in the main, OATs under the most pressure.
  • The exception comes via GGBs, which continue their run of early ’25 outperformance. GGB spreads to Bunds and OATs on for fresh cycle closing lows (~75bp and -5bp, respectively).
  • A conservative PDMA issuance target factors into early ’25 GGB tightening.
  • ECB-dated OIS little changed to a couple of bp more dovish, showing 101.5bp of cuts for ’25, with a 25bp cut later this month near fully discounted.
  • Gilt futures -25 at 91.70 vs. lows of 91.68. Initial support at 91.64 untested.
  • Yields 2-3bp higher, curve steeper.
  • 10s as high as 4.645%, Dec high at 4.651%. Spread to Bunds 2bp wider at 218bp.
  • The presence of 30-Year gilt supply weighed on gilts in early trade.
  • 30-Year gilt yields hit the highest level seen since 1998 ahead of the auction.
  • The auction was taken down smoothly, which allowed UK paper to stabilise.
  • Issuance should dominate locally, with no major European & UK risk events scheduled through the close.
  • Elsewhere, U.S. ISM services & JOLTS data due later, Fedspeak from Barkin also slated.