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BONDS: EGBs-GILTS CASH CLOSE: Early Yield Drop Reverses On Higher Energy Prices

BONDS
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European core yields saw an early drop reverse late in the session, leaving them a little higher Wednesday.

  • Bunds and Gilts strengthened after an overnight trade, in line with a US Treasury rally that kicked off late Tuesday after a solid 7Y bond auction.
  • However, a rise in European natural gas prices to 15-month highs amid supply issues and lower temperature forecasts in the region, applied pressure on the space toward the cash close.
  • Spanish Q4 GDP came in firmer-than-expected; UK Chancellor Reeves' policy speech was longer-term focused, with little in the way of short-term implications or market movement.
  • The German curve bear steepened modestly, with the UK's bear flattening.
  • Periphery EGB spreads tightened. OATs underperformed the rest of the space, with spreads widening rift amid discord between the French government and Socialists.
  • Focus after hours is on the Federal Reserve decision and communications, and of course Thursday sees the ECB decision (a 25bp cut remains nearly 100% priced - MNI's preview is here). We also get Spanish January flash inflation data (MNI's Eurozone inflation preview went out today, PDF here).

Closing Yields / 10-Yr EGB Spreads To Germany

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European core yields saw an early drop reverse late in the session, leaving them a little higher Wednesday.

  • Bunds and Gilts strengthened after an overnight trade, in line with a US Treasury rally that kicked off late Tuesday after a solid 7Y bond auction.
  • However, a rise in European natural gas prices to 15-month highs amid supply issues and lower temperature forecasts in the region, applied pressure on the space toward the cash close.
  • Spanish Q4 GDP came in firmer-than-expected; UK Chancellor Reeves' policy speech was longer-term focused, with little in the way of short-term implications or market movement.
  • The German curve bear steepened modestly, with the UK's bear flattening.
  • Periphery EGB spreads tightened. OATs underperformed the rest of the space, with spreads widening rift amid discord between the French government and Socialists.
  • Focus after hours is on the Federal Reserve decision and communications, and of course Thursday sees the ECB decision (a 25bp cut remains nearly 100% priced - MNI's preview is here). We also get Spanish January flash inflation data (MNI's Eurozone inflation preview went out today, PDF here).

Closing Yields / 10-Yr EGB Spreads To Germany

Keep reading...Show less