Firmer Despite Heavy Supply & Inflationary PMI Internals

Bund futures reached their highest level in a week before fading.

• Core/semi-core EGBs remain firmer on the day.
• Softer-than-expected French IP data helped contracts reach intraday highs, before this morning's round of Eurozone services PMIs limited the rally.
• Details of the PMIs showed wage-led inflationary pressures across countries, but this doesn't do much to change the narrative ahead of Thursday's ECB meeting, with ECB rate cut pricing steady on the day.
• Hedging related pressure surrounding today's EGB supply (German 30-year syndication and Bobl auction, 6/10-year RAGB auction and Croatian syndication) will also have helped limit the rally.
• Elsewhere, Eurozone January PPI was lower than expected, although had little to no impact on EGBs.
• Bunds are +31 at 133.07. Well established technical parameters remain intact (first resistance being the 20-day EMA at 133.14).
• The German and French cash curves have modestly bull flattened.
• The 10-year BTP/Bund spread is -1.4bps at 139.8bps at its tightest levels since January 2022. A stronger composite PMI than Germany alongside a small upward revision to Q4 GDP will have aided the compression.
• The remainder of today's regional calendar is light, though services survey data in the US this afternoon will be of cross-market interest.