EGBS: Bunds Off Highs As Risk Assets Stabilises, Peripherals Still Wider

The stabilisation of European equity and crude oil prices has helped Bunds away from intraday highs, though futures remain +25 ticks today at 134.18.

• The Aug 29 high in Bunds is still intact at 134.49. A breach of this level would strengthen a near-term bullish condition.
• Risk sentiment remains subdued though, which has prompted BTP futures to underperform (+7 today at 119.02) and broader 10-year peripheral spreads to Bunds widen ~1.5bps.
• The Eurozone August final services PMI was slightly weaker than implied by the flash release, though the Olympics-driven French print was confirmed at 55.0.
• Meanwhile, commentary from several ECB speakers continues to point to a rate cut in September, with little firm guidance provided beyond that gathering.
• The German cash curve has bull steepened, with yields -3.5 to -1.5bps lower at typing. The bidding deadline for today’s 15-year Bund supply is at 1030BST/1130CET.
• Broader focus turns to the Bank of Canada decision and US job openings data this afternoon, while BdF’s Villeroy is scheduled to appear on a panel at 1200BST.