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EGBs-GILTS: Long-End Strength Resumes

BOND SUMMARY

Another strong performance by long-end Bunds and Gilts to start Thursday, continuing where we left off yesterday. 10Y and 30Y Bund and Gilt yields have almost erased the yield rises over the past week.

  • Periphery spreads are a little wider, again following through from Wednesday's session when BTPs etc couldn't keep pace with Bund gains.
  • Attention is on BOE's Saunders' speech, "The Inflation Outlook" (1100BST), which could add colour to the potential risks of higher inflation noted by colleagues Cunliffe and Ramsden yesterday.
  • Some attention also on a podcast conversation between ECB's Lagarde and US Tsy's Yellen to be released 1500BST.
  • Little reaction to UK labour mkt data this morning; that's pretty much it for Tier 1 data this week.
  • Decent supply this morning: Spain sells up to E6bln nominal, with France selling E10.5bln (and E1.75bln linkers).

Latest levels:

  • Sep Bund futures (RX) up 34 ticks at 174.68 (L: 174.5 / H: 174.7)
  • Sep Gilt futures (G) up 31 ticks at 129.37 (L: 129.19 / H: 129.41)
  • Sep BTP futures (IK) up 9 ticks at 153.05 (L: 152.89 / H: 153.18)
  • Italy / German 10-Yr spread 1.1bps wider at 104bps

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