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EGBs-GILTS: Another Strong Start

BONDS

A strong start for European FI across the board Tuesday, with the Gilt and Bund curves bull flattening as equities weaken on global COVID / geopolitical / economic slowdown concerns.

  • It's the 2nd consecutive risk-off start (equities lower, core bonds higher). Though worth recalling Monday's session started this way, but then Bunds and Gilts reversed lower.
  • Bunds remain in consolidation mode for now, between 176.21 to 177.61 range (last 177.07).
  • Unlike Monday, BTPs have kept pace, with the 10Y spread vs Germany marginally tighter, though other periphery EGBs are a little tighter.
  • In supply, UK sells GBP2bln of Jan-46 Gilt and Germany sells E6bln of Schatz.
  • Earlier, UK employment data was largely in line (little market impact). Eurozone 2Q prelim GDP out at 1000BST. More attention globally on US retail sales at 1330BST, though.

Latest levels:

  • Sep Bund futures (RX) up 27 ticks at 177.07 (L: 176.71 / H: 177.18)
  • Sep Gilt futures (G) up 12 ticks at 129.92 (L: 129.89 / H: 130.08)
  • Sep BTP futures (IK) up 21 ticks at 155.28 (L: 155.14 / H: 155.37)
  • Italy / German 10-Yr spread 0.2bps tighter at 103.2bps
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