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BONDS: EGBs-GILTS CASH CLOSE: Short-End Strength Sees Steeper Curves

BONDS
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Core European curves steepened Wednesday, ahead of Thursday's ECB decision.

  • Core bonds benefited overnight by the disinflationary implications of China reportedly being set to allow currency depreciation.
  • While  yields would trade in both directions for most of the session, short ends of curves benefited from an in-line US CPI report that cemented prospects for a cut by the Federal Reserve next week.
  • That helped push curves steeper: the German curve twist steepened on the day, with the UK's bull steepening.
  • Periphery EGB spreads tightened, assisted by the slighly more dovish central bank outlook, though notably French OATs moved wider of Bunds, amid anticipation over a new Prime Minister appointee.
  • MNI's preview of the ECB decision was published Tuesday (link): the ECB will cut by 25bp (fully priced by markets; 4 % implied of a 50bp cut), Even if language concerning the ‘restrictive’ policy stance is not removed from the policy statement this time around, it soon will be.

Closing Yields / 10-Yr EGB Spreads To Germany

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Core European curves steepened Wednesday, ahead of Thursday's ECB decision.

  • Core bonds benefited overnight by the disinflationary implications of China reportedly being set to allow currency depreciation.
  • While  yields would trade in both directions for most of the session, short ends of curves benefited from an in-line US CPI report that cemented prospects for a cut by the Federal Reserve next week.
  • That helped push curves steeper: the German curve twist steepened on the day, with the UK's bull steepening.
  • Periphery EGB spreads tightened, assisted by the slighly more dovish central bank outlook, though notably French OATs moved wider of Bunds, amid anticipation over a new Prime Minister appointee.
  • MNI's preview of the ECB decision was published Tuesday (link): the ECB will cut by 25bp (fully priced by markets; 4 % implied of a 50bp cut), Even if language concerning the ‘restrictive’ policy stance is not removed from the policy statement this time around, it soon will be.

Closing Yields / 10-Yr EGB Spreads To Germany

Keep reading...Show less