EGBS: August Flash PMIs Weigh On EGB Futures Despite Easing Wages

The stronger-than-expected August flash PMIs have weighed on major EGB futures, despite being driven by potentially temporary effects in the French services release. Bunds are -26 ticks at 134.53 versus yesterday’s settlement, after reaching a high of 135.08 following the German PMI release.

• Meanwhile, ECB Q2 negotiated wages fell notably to 3.55% (vs 4.74% prior, and at the bottom end of the 3.5-4.5% forecast range MNI had seen coming into the release) but did not provide a sufficiently dovish impulse to have much market reaction, with ECB-dated OIS already pricing 68bps of cuts through year-end.
• The German cash curve has bear steepened this morning, with 2s10s +1.5bps at -15.5bps. 
• The rally in European equity futures, alongside indications that the Eurozone ex-Germany and France continued to outperform in the August flash PMI, has helped 10-year peripheral spreads to tighten. The 10-year BTP/Bund spread is 1.5bps tighter at 135bps.
• The ECB releases its account of the July decision at 1230BST/1330CET today, but US jobless claims data and flash PMIs are likely to be more market moving.