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EGBS: Bunds Little Changed, French Fiscal Headlines & ECB Speak Eyed

EGBS
EurozoneBulletGlobalFixed Income BulletsRegionMarkets

Bund futures off yesterday’s high, +3 at 134.95, trading in a narrow 19-tick range. Futures imply light twist flattening on the German curve at the cash open.

  • The mid-September pullback in the contract is deemed corrective. Initial technical levels still provided by Friday’s range (134.31/135.19)
  • Late Monday trade took cues from Tsys, selling off as Powell stressed that the Fed planned to lower interest rates “over time”.
  • Bunds then recovered towards yesterday’s highs on spillover from month-end extension demand in Tsys.
  • Several sell-side names adjusted their ECB calls late on Monday, now looking for an October cut, following the recent trend.
  • Looking ahead, French PM Barnier is set to speak today. Reports have pointed to tax hikes to raise EUR15-18bln, along with a delay of the timeframe to bring the budget deficit below the EU ceiling of 3% of GDP to ’29. This isn’t surprising given previous reporting on these matters, but such developments would underscore the fiscal difficulties that France faces. OAT/Bunds closed at 79bp on Monday.
  • Data-wise, Tuesday will bring Eurozone HICP & final manufacturing PMIs.
  • We will hear from ECB’s Schnabel, de Guindos, Nagel & Rehn.
  • Germany will come to market with EUR4bln of the 2.50% Oct-29 Bobl.
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Bund futures off yesterday’s high, +3 at 134.95, trading in a narrow 19-tick range. Futures imply light twist flattening on the German curve at the cash open.

  • The mid-September pullback in the contract is deemed corrective. Initial technical levels still provided by Friday’s range (134.31/135.19)
  • Late Monday trade took cues from Tsys, selling off as Powell stressed that the Fed planned to lower interest rates “over time”.
  • Bunds then recovered towards yesterday’s highs on spillover from month-end extension demand in Tsys.
  • Several sell-side names adjusted their ECB calls late on Monday, now looking for an October cut, following the recent trend.
  • Looking ahead, French PM Barnier is set to speak today. Reports have pointed to tax hikes to raise EUR15-18bln, along with a delay of the timeframe to bring the budget deficit below the EU ceiling of 3% of GDP to ’29. This isn’t surprising given previous reporting on these matters, but such developments would underscore the fiscal difficulties that France faces. OAT/Bunds closed at 79bp on Monday.
  • Data-wise, Tuesday will bring Eurozone HICP & final manufacturing PMIs.
  • We will hear from ECB’s Schnabel, de Guindos, Nagel & Rehn.
  • Germany will come to market with EUR4bln of the 2.50% Oct-29 Bobl.