EGBS: US CPI Fallout Keeps Core/Semi-core Underpinned; Peripherals Tighter

Fallout from the softer-than-expected US CPI print helps keep core/semi-core EGBs underpinned.

• Bunds are +102 ticks at 131.18, though remain below last Thursday’s levels. Key resistance to watch is 131.53, the 50-day EMA. A clear break of it would highlight a potential reversal of the current bearish trend.
• ECB VP de Guindos re-iterated the Bank’s cautious stance at this afternoon’s MNI event, highlighting that “the risks that could derail the disinflation process are clear”. 
• The 10-year OAT/Bund spread tightened a touch after the conservative Republicains leader was ousted, but the spread is little changed overall today, around ~61bps (in contrast to the sharp widening seen in recent days). 
• 10-year peripheral spreads are tighter following the US CPI-induced risk-on, with the 10-year BTP/Bund spread now back below 140bps (after showing above 150bps yesterday).
• MSCI has rejected plans to include EU bonds in Government debt indices, we will provide more colour in due course.
• Tomorrow, Italy will hold a 3/7/15/25-year BTP auction.
• The FOMC decision is the main focus this evening, with tomorrow’s regional data calendar once again relatively light.