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EGBS: Bunds Weighed By Equity Recovery, BTPs Outperform

EGBS
EurozoneBulletGlobalFixed Income BulletsRegionMarkets

BTPs lightly outperform Bunds this morning, helping the 10-year BTP/Bund spread narrow to 135bps, its tightest since late-August. Regional headline flow has been light, with broader focus on Wednesday’s Fed decision, and the potential for a 50bp rate cut.

  • The recovery in European equity futures has aided the tightening in BTP spreads, with Estoxx 50 futures now back towards intraday highs.
  • ECB-hawk Kazimir has become the latest advocate for the next ECB rate cut to come in December. However, OIS markets continue to assign a ~30% implied probability of a 25bp move in October.
  • Eurozone Q2 labour costs saw a 6 tenths upward revision from the flash estimate to 4.7% Y/Y, but the overall trend of moderating labour cost pressures remains intact.
  • German cash yields are +0.5 to +1.5bps higher today, with the 2s10 curve little changed and 5s30s lightly bear flattening.
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BTPs lightly outperform Bunds this morning, helping the 10-year BTP/Bund spread narrow to 135bps, its tightest since late-August. Regional headline flow has been light, with broader focus on Wednesday’s Fed decision, and the potential for a 50bp rate cut.

  • The recovery in European equity futures has aided the tightening in BTP spreads, with Estoxx 50 futures now back towards intraday highs.
  • ECB-hawk Kazimir has become the latest advocate for the next ECB rate cut to come in December. However, OIS markets continue to assign a ~30% implied probability of a 25bp move in October.
  • Eurozone Q2 labour costs saw a 6 tenths upward revision from the flash estimate to 4.7% Y/Y, but the overall trend of moderating labour cost pressures remains intact.
  • German cash yields are +0.5 to +1.5bps higher today, with the 2s10 curve little changed and 5s30s lightly bear flattening.