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BONDS: EGBs-GILTS CASH CLOSE: Inflation Uptick Sees Bunds Underperform

BONDS
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Core European yields rose to start the week, with Bunds underperforming Gilts Monday.

  • State-level German data in the morning correctly pointed to an upside surprise in the preliminary December national level inflation release in the afternoon.
  • Having apparently confirmed the trend seen in solid Spanish and Portuguese data last week, inflation breakevens rose (EUR 5Y5Y swap +2.9bp to the highest since mid-Nov at 2.08%), paring ECB cut pricing. Final Eurozone PMIs for December also saw upward revisions and firmer price pressures.
  • Supply concerns also weighed on core FI, with UK, Austrian and German auctions Tuesday alongside an expected Belgian 10Y syndication.
  • The German curve bear flattened, with the UK's lightly bear steepening.
  • Periphery/semi-core spreads tightened, with OATs slightly outperforming in a partial reversal of late December's sell-off.
  • Tuesday's early highlights include inflation data from Switzerland, France, Italy, and the Eurozone.

Closing Yields / 10-Yr EGB Spreads To Germany

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Core European yields rose to start the week, with Bunds underperforming Gilts Monday.

  • State-level German data in the morning correctly pointed to an upside surprise in the preliminary December national level inflation release in the afternoon.
  • Having apparently confirmed the trend seen in solid Spanish and Portuguese data last week, inflation breakevens rose (EUR 5Y5Y swap +2.9bp to the highest since mid-Nov at 2.08%), paring ECB cut pricing. Final Eurozone PMIs for December also saw upward revisions and firmer price pressures.
  • Supply concerns also weighed on core FI, with UK, Austrian and German auctions Tuesday alongside an expected Belgian 10Y syndication.
  • The German curve bear flattened, with the UK's lightly bear steepening.
  • Periphery/semi-core spreads tightened, with OATs slightly outperforming in a partial reversal of late December's sell-off.
  • Tuesday's early highlights include inflation data from Switzerland, France, Italy, and the Eurozone.

Closing Yields / 10-Yr EGB Spreads To Germany

Keep reading...Show less