German Short End In Catch-Up Rally With Tsys

German short-end yields are sharply lower in early Wednesday trade, catching up with the US Treasury rally after Tuesday's European cash close.

• The latest leg of the recent risk-off move was triggered late Tuesday on reports First Republic Bank could divest up to $100B in assets.
• The US curve is a little weaker, steadying out vs Tuesday's bull steepening.
• Meanwhile there is sharp bull steepening in Germany, with 2Y yields down 13bp and 10s down 5bp - again, mostly reflecting the risk-off move after Tuesday's cash close rather than European developments this morning.
• Gilts have been fairly steady by comparison, with no directional move in the UK curve (yields down 2-2.5bp across the board).
• A fairly light events schedule lies ahead, with March durable goods and trade balance the highlights of the US calendar. We also hear from the ECB's Guindos and Herodotou.
• In U.S. supply we get $24B 2Y FRN and $43B 5Y Note auctions.

Latest levels:

• Jun US 10Y futures (TY) down 2.5/32 at 115-23 (L: 115-18 / H: 115-25.5)
• Jun Bund futures (RX) up 40 ticks at 135.42 (L: 134.93 / H: 135.74)
• Jun Gilt futures (G) up 18 ticks at 101.93 (L: 101.68 / H: 102.12)
• Italy / German 10-Yr spread 0.2bps tighter at 189bps