EGBS: Higher Than Expected July Inflation Data Helps Bunds Off Highs

The higher-than-expected Italian and Eurozone flash July CPI prints helped Bund futures off intraday highs, currently +10 ticks at 133.48.

• Bunds reached a high of 133.76 prior to the Italian data (which was released early as a result of technical issues) after pushing through yesterday’s high at 133.60 this morning.
• There wasn’t much material reaction in EGBs to the BoJ’s decision overnight, where rates were hiked 15bp (in line with local media reporting in the run up to the decision) and bond purchases were tapered.

• Instead, core FI took positive cues from a build-up of geopolitical tensions in the Middle East, after Hamas confirmed its political leader was killed by Israeli strikes. 
• German cash yields are around 1bp lower today, while 10-year peripheral spreads to Bunds are slightly tighter (with this morning’s chip-led rally in European equities countering the  negative impetus from the geopolitical tensions).
• The bidding deadline for today’s short 7-year Bund supply has just passed.
• The US quarterly refunding announcement will attract interest at 1330BST, though today’s FOMC decision at 1900BST remains the primary focus.