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EGBS: Bunds Pare Friday’s Gains Post German-state Level Data

EGBS
EurozoneBulletGlobalFixed Income BulletsRegionMarkets

Bund futures have essentially fully pared Friday’s gains following the German state-level CPI data, currently -28 ticks today at 134.53.

  • Italian flash inflation was in line with consensus at 0.8% Y/Y, while core inflation saw a five tenths deceleration.
  • There has been a small unwind of ECB rate cut pricing on the German data, but ECB-dated OIS continue to price a ~70% implied probability of an October cut.
  • The German curve has bear flattened as a result, with 2-year yields +4bps and 30-year yields +2.5bps.
  • The 10-year OAT/Bund spread remains at ~80bps despite local media suggestions of temporary taxes to support government revenues.
  • The BTP/Bund spread is just off intraday wides, but remains ~1.5bps wider at 133bps, with European equities weaker today.
  • Focus turns to the German national CPI data at 1300BST and ECB President Lagarde’s presentation to EU Parliament at 1400BST. 
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Bund futures have essentially fully pared Friday’s gains following the German state-level CPI data, currently -28 ticks today at 134.53.

  • Italian flash inflation was in line with consensus at 0.8% Y/Y, while core inflation saw a five tenths deceleration.
  • There has been a small unwind of ECB rate cut pricing on the German data, but ECB-dated OIS continue to price a ~70% implied probability of an October cut.
  • The German curve has bear flattened as a result, with 2-year yields +4bps and 30-year yields +2.5bps.
  • The 10-year OAT/Bund spread remains at ~80bps despite local media suggestions of temporary taxes to support government revenues.
  • The BTP/Bund spread is just off intraday wides, but remains ~1.5bps wider at 133bps, with European equities weaker today.
  • Focus turns to the German national CPI data at 1300BST and ECB President Lagarde’s presentation to EU Parliament at 1400BST.