EGBS: Bunds Just Off Intraday Highs; Political Uncertainty Dominates Discussions

Bunds are just off intraday highs, currently +137 ticks at 132.70, with French political uncertainty continuing to dominate discussions regionally.

• Recent gains in Bund futures from 129.37, the May 31 low, still appear to be a correction, but today’s price action suggests potential for a stronger corrective bounce and possibly even a short-term reversal. The next key resistance to watch is 132.83, May 16 high.
• OAT futures underperform Bunds as a result of the political uncertainty (+51 ticks at 124.18), while BTP futures lag, currently +46 at 116.53.
• French final HICP was a touch softer than the flash reading on a rounded basis (2.6% Y/Y vs 2.7% prior) but was not a market mover.
• ECB speakers Vasle and Kazaks largely reiterated previous remarks. Possible comments from Chief Economist Lane from a panel discussion may also filter through this morning.
• There was limited reaction to the BoJ decision and subsequent press conference overnight/this morning.
• The German and French cash curves have bull steepened, while the 10-year OAT/Bund spread has pulled back a touch from early wides, currently around 4bps wider at 73bps. 
• 10-year peripheral spreads to Bunds are also wider, with European equities under pressure from the continued political uncertainty.
• Scheduled appearances from ECB’s Schnabel (1430BST) and Lagarde (1830BST) will likely attract interest later today, albeit with the latter appearing after this week’s cash close.