Gilts Unwind Some Of Yesterday’s Outperformance Vs. EGBs

Bunds -27 at 134.82, German yields 1-2bp higher.

• EGB spreads vs. Bunds are within 1bp of yesterday’s closing levels, some light outperformance for OATs & BTPs.
• Redeployment of backflows from coupon payments and redemptions may be providing support for Italian paper.
• The Assumption Day holiday will be limiting activity in EGBs.
• Gilt futures -35 at 100.41, comfortably within yesterday’s range.
• Technical setup in that contract remains bullish, initial resistance at yesterday’s high (100.80).
• Yields 2-3bp higher across the curve.
• Gilts didn’t react to UK GDP data which matched wider expectations.
• UK paper gives back some of yesterday’s CPI-driven outperformance vs. EGBs.
• ECB & BoE-dated OIS pricing little changed vs. levels seen late yesterday, showing ~25bp & ~8.5bp of cuts for respective Sep meetings.
• Little of note on the European & UK schedules through the remainder of the day, which will leave focus on U.S. weekly jobless claims and retail sales data.
• Fedspeak from Musalem & Harker is also due.