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EGBS: Weak Flash PMI Drive Bull Steepening In Cash Curves, 10-year Spreads Widen

EGBS
EurozoneBulletGlobalFixed Income BulletsRegionMarkets

Bund futures are off intraday highs, but remain +72 ticks higher at 134.65 after the September flash PMIs signalled weak developments in output and new orders as well as softening inflationary pressures.

  • The French services print saw a notable fall to 48.3 (vs 53.1 cons, 55.0 prior).
  • The resulting dovish repricing in EUR STIRs (now 9bps of cuts priced through the October meeting vs 5bps this morning) has driven a bull steepening in cash curves.
  • The German 2s10s curve disinverted for the first time since August 2022, currently hovering around zero.
  • The weak growth signals from the PMIs have prompted a widening of 10-year EGB spreads to Bunds.
  • The 10-year OAT/Bund spread briefly rose above 80bps for the first time since late-June, but has now narrowed back to ~78bps. Concerns around the stability of PM Barnier’s new cabinet continues to promote uncertainty.
  • Today’s supply has included 5/20-year EU-bonds, while the ESM are issuing a new 3-year bond via syndication.
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Bund futures are off intraday highs, but remain +72 ticks higher at 134.65 after the September flash PMIs signalled weak developments in output and new orders as well as softening inflationary pressures.

  • The French services print saw a notable fall to 48.3 (vs 53.1 cons, 55.0 prior).
  • The resulting dovish repricing in EUR STIRs (now 9bps of cuts priced through the October meeting vs 5bps this morning) has driven a bull steepening in cash curves.
  • The German 2s10s curve disinverted for the first time since August 2022, currently hovering around zero.
  • The weak growth signals from the PMIs have prompted a widening of 10-year EGB spreads to Bunds.
  • The 10-year OAT/Bund spread briefly rose above 80bps for the first time since late-June, but has now narrowed back to ~78bps. Concerns around the stability of PM Barnier’s new cabinet continues to promote uncertainty.
  • Today’s supply has included 5/20-year EU-bonds, while the ESM are issuing a new 3-year bond via syndication.