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German inflation and US GDP in focus

BONDS
  • After reacting to yesterday's FOMC statement, the focus this morning has been on German inflation. Initial state prints pointed to a much higher print than the consensus for the national print would suggest, but later prints were not quite so high. There are still upside risks of around 2-3 tenths in the data, but this is less than had been previously expected. The national print is due at 13:00BST / 8:00ET.
  • Overall this has led to shorter-term yields falling in EGBs and gilts, but 10-year yields moving higher.
  • At 13:30BST / 8:30ET, we have the first print of US GDP for Q2 due this afternoon. Powell said yesterday that the US economy doesn't seem to be in recession now but that we are seeing some slowdown in growth and that the slowdown in the second quarter is "notable". The Bloomberg consensus looks for a 0.5%quarterly print, but most economists submitted their expectations before yesterday's durable goods and inventory data, both of which were above expectations and point to upside risks.
  • We are also due to receive US weekly claims data while Banca d'Italia's Visco is due to speak this afternoon and any further comments he makes on BTP-Bund spreads will be watched - particularly in the context of TPI. He has previously said that moves for the 10-year spread above 200bp are not justified by the fundamentals.
  • TY1 futures are down -0-11 today at 120-02+ with 10y UST yields unch at 2.788% and 2y yields down -1.6bp at 2.983%.
  • Bund futures are down -0.79 today at 155.37 with 10y Bund yields up 3.5bp at 0.978% and Schatz yields down -3.2bp at 0.393%.
  • Gilt futures are down -0.46 today at 116.97 with 10y yields up 3.7bp at 1.993% and 2y yields down -1.0bp at 1.851%.
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