EGBs & Gilts Off Lows, Early Local Data & Equity Weakness Provides Support

EGBs & gilts are off lows with bulls looking to the weakness in major global equity indices, as well as softer-than-expected consumer inflation expectations readings from the ECB & UK wage data (post-long weekend Tsy catch up, soft demand at a JGB auction and Trump’s strong showing in Iowa were touted as negatives for bonds in Asia).

• There has been some modest counter from rhetoric out of the ECB and a firmer-than-expected round of German ZEW expectations.
• Although IG supply remains evident, it comes at a stepped down pace vs. last week.
• The French Green OAT syndication has already attracted solid demand, building on the early ’24 theme re: EGB syndications.
• Bunds last unchanged at 132.25, with yields on the German curve now little changed on the day.
• 10-Year EGB spreads to Bunds are generally within ~0.5bp of yesterday’s closing levels.
• Gilt futures are +15, at ~100.20 1, -15 ticks shy of best levels. Cash gilt yields are 2.5bp lower to 1.5bp higher across the curve, twist steepening. 5s30s registers fresh cycle steeps.
• The latest round of I/L gilt supply generated strong demand metrics.
• Note that both ECB and BoE STIR pricing for ’24 meetings sits little changed on the day.
• Speakers from Davos will be eyed through the day, although NY comments from Fed Governor Waller provide the key scheduled risk event from here.
• Note that BoE Governor Bailey’s scheduled address has been postponed.