Firmer Into NFPs, But Off Best Levels

EGBs comfortably higher on the day, with this morning’s European data and weakness in equity markets driving the bid (element of pre-NFP positioning likely factoring in as well).

• Bund futures traded through initial resistance levels to print as high as 134.68, before backing off to 134.52 last.
• Fresh extensions higher would target Fibonacci resistance at 134.95.
• German yields 2-4bp lower, bull flattening.
• German ASWs a little wider.
• EGB spreads vs. Bunds little changed after some early, modest widening alongside the weakness in equities.
• BTP/Bunds remains tethered to 145bp, while OAT/Bunds looks below 70bp once again. The latter has failed to hold similar moves below that level in recent weeks.
• ECB-dated OIS prices ~24bp of cuts for this month’s meeting and ~64bp of easing through year-end, remaining a bit more aggressive than the once-per-quarter guidance that several GC members have pointed towards in recent weeks.
• Fresh cycle lows for EUR 5y5y inflation-linked swaps (although don’t expect this to alter ECB language give the focus on in house indicators), with soft equities and lower oil prices continuing to weigh.