EGBS: OATs Outperform As Markets Await PM Barnier’s Address

OATs have led this morning’s rally in major EGB futures, with PM Barnier expected to announce measures to tighten fiscal policy at today’s parliamentary address (1400BST/1500CET). 

• The 10-year OAT/Bund spread has tightened ~3.5bps today to 75.5bps, its tightest since Sep 20.
• OAT futures are +102 ticks at 127.86, with round number resistance (128.00) shielding the Sep 17 high at 128.14.
• Bund futures briefly reached intraday highs of 135.72, piercing the bull trigger at 135.66 (Aug 5 high), but have since retraced a little to 135.61 (still +69 ticks today).
• National-level data released over the past three sessions meant Eurozone September flash inflation was not a market mover, with headline and core meeting consensus estimates at 1.8% and 2.7% Y/Y respectively.
• ECB-dated OIS continue to price almost a  90% implied probability of an October cut.
• 10-year Bund yields reached their lowest level since early January this morning (2.054%) prompting the German 2s10s curve to flatten almost 4bps.
• 10-year peripheral spreads to Bunds are generally biased tighter, with the exception of Greece. 10-Year BTP yields are sub 3.40% for the first time since ’22
• Today’s US ISM manufacturing and JOLTS data headline the remainder of today’s macro calendar.