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Flat/Slightly Firmer With Curves Flattening

EGBS

EGBs sit slightly flat to slightly firmer on Monday with Bund, OAT and periphery curves flattening.

  • Local headline flow has been light otherwise, with news of the Cabinet Reshuffle in the UK not spilling over notably into the EGB space. Comments from ECB's de Guindos this morning have reiterated previous rhetoric from Lagarde r.e. policy rates staying sufficiently restrictive for as long as necessary.
  • Bund futures are broadly flat today at 129.81 having previously found some resistance at 130.13. Technical studies remain bullish following the recent breach of a key resistance at 130.20, the Oct 12 high and a bull trigger. Current volumes are the lowest in the past 5 sessions.
  • 10Y Bund yields down are -0.5bp at 2.711%, while Schatz underperforms the curve with yields up 1.8bp at 3.076% (potentially owing to ECB cut pricing being incrementally pared back in recent sessions).
  • Periphery spreads sit tighter to Bunds. Italy outperforms after Fitch affirmed their rating at BBB (Outlook stable) after hours on Friday - easing market concerns r.e. Moody's review this Friday. The 10-Yr BTP/Bund spread is currently 3.1bps tighter at 182.4bps.
  • Today's agenda is thin in the Euro area, with no ECB-speak nor data currently scheduled. EZ GDP/employment data will be of some residual interest tomorrow but US CPI will be at the forefront of market attention.

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