EGBS: Equity Recovery Weighs, German 2s10s Eyes Disinversion

Core/semi-core EGBs have weakened through the morning, with the recovery of major equity benchmarks leaving Bund futures -69 ticks today at 133.86. 

• The 20-day EMA at 133.70 provides the first support in Bunds, though bears will need to push through the 50-day EMA at 133.09 to signal scope for a deeper retracement.
• The September Sentix survey was weaker-than-consensus at -15.4 (vs -12.2 cons, -13.9 prior). While not market moving, this signals a soft start to the September sentiment round.
• The German cash curve has bear steepened, with 2s10s (currently -4.5bps) looking to disinvert for the first time since August 2022. This would follow the disinversion of US 2s10s since Friday's payrolls report.
• The 10-year OAT/Bund spread is 1bp wider at 71bps, after the French finance ministry requested a deadline extension for the submission of its medium-term fiscal-structural plan to the EU Commission.
• Broader peripheral spreads to Bunds are a little tighter though, owing to the equity rally.
• Thursday’s ECB meeting headlines the regional calendar this week, with a 25bp cut unanimously expected and fully priced by ECB-dated OIS.