EGBS & Gilts Happy To Hold Bulk OF Early Gains Ahead Of U.S. Risk Events

EGBs & Gilts are generally happy to hold on to the bulk of the early richening that was lodged in lieu of the latest round of softer than expected Chinese economic data and debt ceiling worry in the U.S., as well as the softer than expected UK labour market data suite. The markets have consolidated comfortably off of yesterday’s cheaps as we await a barrage of Fedspeak and the latest U.S. retail sales data.

• Passable demand in the syndication of the new Belgian Jun-43 OLO (pricing a touch firmer than guidance, with a slightly lower nominal amount issued than we expected) and solid demand at the syndication of the new UK Oct-63 Gilt (pricing at the richer end of guidance range, with the amount issued just above the midpoint of our assumed range) also helped.
• 10-Year EGB spreads vs. Bunds are little changed, excluding Greek paper, which has given back some of yesterday’s tightening.
• Gilt outperformance is noted in the wake of the softer than expected domestic labour market data, with the broader Gilt curve bull steepening aided by receiver-side flows on the SONIA OIS strip post-data, as terminal BoE rate pricing nudges lower on the day.