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Pullback Considered Corrective


Holding Above Recent Lows


BLOCK, Large 3Y Midcurve Put Condor

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After some modest weakness in morning trade, Bunds and Gilts fell sharply Wednesday afternoon alongside US Treasuries.

  • The bearish tone was set early with a pre-open beat on UK CPI, with some of Tuesday's post-US CPI global rally appearing to be reconsidered as the underlying inflation dynamics weren't particularly favourable for future Fed tightening prospects.
  • The German curve steepened sharply; UK had more of a parallel shift. That said, no particular trigger for the moves.
  • Italian spreads widened after 10Y/Bunds appeared to be establishing a hold below 100bp (low was 98.9, a little higher vs Tues low). Greece modestly outperformed.
  • Upcoming supply potentially eyed by bears: Austria set to sell new 15Y RAGB via syndication Thursday, while Spain/France sells E14+B of Bonds.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

  • Germany: The 2-Yr yield is down 0.1bps at -0.701%, 5-Yr is up 2bps at -0.624%, 10-Yr is up 3.4bps at -0.306%, and 30-Yr is up 4bps at 0.192%.
  • UK: The 2-Yr yield is up 3.4bps at 0.265%, 5-Yr is up 3.4bps at 0.453%, 10-Yr is up 3.9bps at 0.777%, and 30-Yr is up 3.4bps at 1.077%.
  • Italian BTP spread up 2.1bps at 100.8bps / Spanish up 0.4bps at 65bps