European CPIs Result In EGBs Rally, OATs Tighten On Rating Relief

EGBs rallied on the back of the Spanish CPI data, with the move then extending as German regional CPI readings pointed to downside risk in this afternoon’s national flash reading ( click for further details on the German data)

• Bund futures extended through Friday’s peak but never tested 131.00, paring gains to last trade at 130.70. The speed of this morning’s move may have acted as a limiting factor, with an eye on EU supply also noted.
• German cash yields are 2.5-4.0bp lower across the curve, light flattening seen.
• OATs have benefitted from ratings relief after France avoided negative action from both Fitch (current rating: AA-; Outlook Stable) & Moody’s (current rating: Aa2; Outlook Stable) after hours on Friday. OATs outperform EGBs and core global peers across the curve as a result. Click for further colour.
• Spanish PM Sanchez has decided to stay on after tabling a potential resignation on the back of a corruption scandal surrounding his wife. SPGBs are little changed on the news, with little widening pressure seen ahead of time. Click to see why.
• Gilts follow broader price moves in EGBs, albeit lagging German peers across the curve. Futures had a look through Friday’s highs before fading, while cash gilt yields are 1-2bp lower, curve sees some light bull steepening.
• ECB-speak from Lane, Muller & de Guindos is due during the remainder of the day.