Firmer In Spite Of Impressive Services PMIs

Core/semi-core EGBs are off intraday highs but remain firmer on the day, as markets digest this morning’s strong services PMI data alongside Spanish and French supply.

• The March services PMIs were strong across the board, particularly in Spain and Italy. This helped the Eurozone final composite above 50.0 for the first time since May 2023 (was 49.9 in the flash) - indicating regional activity is recovering from a trough in 2H 2023.
• Bunds nonetheless moved higher following the PMIs, with order-related flow proving supportive.
• E12bln LT OAT supply from France and E6.5bln Bono/Obli/ObliEi supply from Spain were well digested, with low prices above pre-auction mid-prices in each line offered.
• Bunds are +34 at 132.55, while OAT futures are +36 at 127.32.
• The German and French cash curves have bull flattened today, but the German 2s10s curve remains steeper this week.
• 10-year periphery spreads to Bunds are tighter, though the BTP/Bund spread remains above the 140bps handle.
• The ECB’s March meeting minutes headline the remainder of today’s regional docket, while US jobless claims data will also be of interest ahead of tomorrow’s payrolls release.