Euro Inflation Progress Helps Bunds Lead Global Core Rally

Global core FI has rallied with European outperformance focused on curve bellies in morning trade Friday.

• With more preliminary data out this morning showing convincing progress on eurozone inflation in September (the slowdown in Euro core HICP to 4.5% vs 4.8% consensus particularly noteworthy), Germany is leading the rally, with 5Y-10Y yields down 8+bp, pulling back from multi-year highs set Thursday.
• Gilts have underperformed Bunds; 5Y yields are outperforming on the UK curve, down 5+bp.
• US Tsys have leaned bull flatter, with 10Y yields down around 4bp.
• Periphery EGB spreads have narrowed on a more constructive global risk atmosphere than seen earlier in the week, with the USD fading and equities higher.
• Earlier, JGBs spiked higher on an unscheduled BOJ bond purchase, but the move quickly reversed.
• Attention for the rest of the session is on month- and quarter-end dynamics, with a solid US data slate including August PCE, final UMich sentiment, inventories, trade balance, and of course, September MNI Chicago PMI.

Latest levels:

• Dec US 10Y futures (TY) up 11/32 at 108-6.5 (L: 107-26 / H: 108-08.5)
• Dec Bund futures (RX) up 135 ticks at 128.44 (L: 127.46 / H: 128.46)
• Dec Gilt futures (G) up 117 ticks at 94.05 (L: 93.62 / H: 94.18)
• Italy / German 10-Yr spread 3.4bps tighter at 190.4bps