EGBs/Gilts Firmer, But Still Below Friday’s Highs

Core/semi-core EGBs and Gilts are firmer on the day but remain below Friday’s highest levels. Focus across global markets remains on risk events later in the week (US CPI/PPI, ECB decision).

• In the absence of notable data or headline flow, supply has been the main theme this morning.
• Today’s 4.75% Oct-43 Gilt tap attracted an impressive 3.67x bid-to-cover, but Gilt futures saw a limited reaction.
• Eurozone supply includes a Belgian 5-year benchmark syndication (spread has been set), alongside conventional auctions from Austria and Germany.
• Despite this, futures have been happy to move higher alongside US Tsys through the morning.
• Bunds are +39 ticks at 132.22, while Gilts are +51 ticks at 98.79. A bearish technical threat nonetheless remains intact in both contracts.
• The German and UK cash curves have both bull flattened, while 10-year peripheral spreads to Bunds are tighter. The 10-year BTP/Bund spread is currently 2.6bps tighter at 136.8bps, down from the recent extreme of ~145bps seen last week.
• Today’s ECB Bank Lending Survey saw bank credit standards “broadly unchanged”, and wasn’t a market mover as a result.
• The UK/Eurozone calendar is very light for the remainder of today.