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EGBS: Supported By October ECB Cut Speculation and Crude Pullback

EGBS
EurozoneBulletGlobalFixed Income BulletsRegionMarkets

The pullback in crude prices and heightened speculation of an October ECB rate cut have supported EGBs this morning. Bunds are +37 at 134.81 but remain short of yesterday’s 134.98 high.

  • Reuters reported that policy doves are pushing for a rate cut in October, helping the OIS implied probability of a cut at that meeting extend to ~70% (vs 20% at the start of this week).
  • The German cash curve has bull steepened as a result, with 2s10s now at 6bps.
  • OAT futures underperform, currently +29 at 126.63, amid rumours that France has asked the EC for a 2-year delay in reaching its 3% deficit target (i.e. in 2029 instead of 2027). The 10-year OAT/Bund spread is 1bp wider at 80bps, while the Spain/France spread has turned negative.
  • 10-year peripheral spreads to Bunds have tightened owing to this morning’s strong equity market rally, with BTPs outperforming.
  • Eurozone August money supply growth was 2.9% Y/Y (vs 2.5% cons).
  • Focus turns to potential remarks from Lagarde, de Guindos and Schnabel, alongside this afternoon’s suite of US data.
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The pullback in crude prices and heightened speculation of an October ECB rate cut have supported EGBs this morning. Bunds are +37 at 134.81 but remain short of yesterday’s 134.98 high.

  • Reuters reported that policy doves are pushing for a rate cut in October, helping the OIS implied probability of a cut at that meeting extend to ~70% (vs 20% at the start of this week).
  • The German cash curve has bull steepened as a result, with 2s10s now at 6bps.
  • OAT futures underperform, currently +29 at 126.63, amid rumours that France has asked the EC for a 2-year delay in reaching its 3% deficit target (i.e. in 2029 instead of 2027). The 10-year OAT/Bund spread is 1bp wider at 80bps, while the Spain/France spread has turned negative.
  • 10-year peripheral spreads to Bunds have tightened owing to this morning’s strong equity market rally, with BTPs outperforming.
  • Eurozone August money supply growth was 2.9% Y/Y (vs 2.5% cons).
  • Focus turns to potential remarks from Lagarde, de Guindos and Schnabel, alongside this afternoon’s suite of US data.