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Gilts still outperform but Bunds playing catch up

BONDS
  • Gilts were the early outperformers in core FI space after inflation data which was marginally weaker than economists' expectations but led to a reassessment of market pricing, reducing the probability of 75bp hikes from the Bank of England. Lower oil prices have also led to core fixed income generally moving higher (yields lower) with 10y Bunds almost having caught up to the moves seen in gilts, but both outperforming US Treasuries.
  • The focus will now begin to turn to Powell's semi-annual testimony where markets will be watching for any clues on the Fed's near-term plans (50bp, 75bp or 100bp in July?) and also on longer-term expectations and the probability of the Fed's policy inducing a recession.
  • We will also hear from Fed's Barkin, Evans and Harker while Canadian CPI will be closely watched north of the border.
  • TY1 futures are up 0-16 today at 116-09+ with 10y UST yields down -4.7bp at 3.231% and 2y yields down -4.7bp at 3.151%.
  • Bund futures are up 1.13 today at 144.46 with 10y Bund yields down -9.2bp at 1.675% and Schatz yields down -6.6bp at 1.067%.
  • Gilt futures are up 0.80 today at 111.58 with 10y yields down -10.2bp at 2.550% and 2y yields down -12.3bp at 2.175%.
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  • Gilts were the early outperformers in core FI space after inflation data which was marginally weaker than economists' expectations but led to a reassessment of market pricing, reducing the probability of 75bp hikes from the Bank of England. Lower oil prices have also led to core fixed income generally moving higher (yields lower) with 10y Bunds almost having caught up to the moves seen in gilts, but both outperforming US Treasuries.
  • The focus will now begin to turn to Powell's semi-annual testimony where markets will be watching for any clues on the Fed's near-term plans (50bp, 75bp or 100bp in July?) and also on longer-term expectations and the probability of the Fed's policy inducing a recession.
  • We will also hear from Fed's Barkin, Evans and Harker while Canadian CPI will be closely watched north of the border.
  • TY1 futures are up 0-16 today at 116-09+ with 10y UST yields down -4.7bp at 3.231% and 2y yields down -4.7bp at 3.151%.
  • Bund futures are up 1.13 today at 144.46 with 10y Bund yields down -9.2bp at 1.675% and Schatz yields down -6.6bp at 1.067%.
  • Gilt futures are up 0.80 today at 111.58 with 10y yields down -10.2bp at 2.550% and 2y yields down -12.3bp at 2.175%.