EGBS: Weaker As Markets Await Likely ECB Cut

Core/semi-core EGBs are weaker this morning, trading in a similar fashion to Tsys and widening vs. gilts, as markets await the ECB decision at 1315 BST.

• A 25bp cut is unanimously expected and ~95% discounted by OIS.
• Our full preview of the event is available here. 
• Although German factory orders data was weaker-than-expected, the resulting rally in bonds was small and short-lived, with the details of the data a little more upbeat than the soft headline readings.
• This morning’s Spanish and French supply will have weighed in the run-up to the bidding deadlines, countering any impact from the softer than expected Eurozone retail sales reading.
• Bund futures are -28 ticks at 131.21, a little off the low of today’s 38-tick range.
• The contract sticks comfortably within yesterday’s boundaries.
• The German and French cash curves have bear steepened, with yields 1-2bp higher.
• 10-year peripheral spreads are generally little changed vs. Bunds, except for BTPs, which sit slightly tighter.