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EGBS: BoJ Headlines Help Core FI Away From Highs; Peripherals Widen

EGBS

Core/semi-core EGBs are off intraday highs after this morning’s rally lost steam. Headlines speculating on the BoJ’s bond purchase programme ahead of next week’s meeting have provided the latest source of pressure to the space

  • The softer oil price backdrop provided support to core FI markets again this morning, with brent crude futures almost 2% lower and the EUR 5y5y inflation swap around 2bps softer.
  • The downtick in European equity futures and a higher-then-expected Germany unemployed persons print also factored into the rally, though today’s supply calendar (RAGB/Schatz conventional auctions and an ongoing Green Bund syndication) may have helped limit moves to the upside.
  • That leaves Bunds +22 ticks at 130.19, down from a high of 130.48 and back below the 20-day EMA at 130.28.
  • German and French cash yields are 1 to 2bps lower today, while 10-year peripheral spreads to Bunds are wider with equities under pressure.
  • Immediate focus now turns to today’s US JOLTS data, ahead of Friday’s non-farm payrolls release.

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