Generally A Little Firmer On Weaker Equities & Bid In Gilts, Before German ZEW Trims Gains

A bid in UK bonds, in the wake of domestic labour market data, helped Bunds away from worst levels of the day, which allowed Monday’s low in futures to hold after an early test.

• Weakness in benchmark European equity indices also aided the bid in FI.
• The expectations component of the latest German ZEW survey wasn’t as soft as expected, but was still negative, while the current conditions metric saw a more pronounced deterioration vs. exp. The expectations component has allowed Bunds to move away from best levels.
• Bund futures last +10.
• German cash benchmarks bull flatten, sitting flat to 2bp richer.
• Most core/semi-core EGB curves see similar moves.
• Peripherals are mixed in spread terms, with BTPs (1bp tighter, July Wides holding) & GGBs (1bp wider) providing the extremes to the range of spread moves (vs. Bunds). Peripheral curves have generally twist flattened.
• Dutch Jan-26 DSL supply was digested smoothly, with Schatz supply and the EU 7-Year syndication providing the other regional rounds of issuance to note today.