Holzmann comments push core FI higher

Core fixed income has been moving higher through this morning as terminal rate expectations have shifted lower after comments from ECB's Holzmann which were considered less hawkish than his usual communication.

• Schatz yields are down 2.2bp on the day, dragging 2-year UST yields a similar amount, but it is 2-year gilt yields that have seen the biggest move at the short-end of the govvie curve, moving with a higher beta than Schatz.
• However, in the 10-year space there have been similar moves for both Bunds and gilts, with yields down around 8bp for both, more than the 5bp decrease in UST yields.
• This has therefore seen the biggest flattening of the 2s10s curve in Germany (around 5.5bp), with gilts and USTs seeing around 3.5bp of flattening.
• Looking ahead, markets already have one eye on tomorrow's US CPI print.
• TY1 futures are up 0-10 today at 114-010 with 10y UST yields down -5.1bp at 3.571% and 2y yields down -2.3bp at 4.227%.
• Bund futures are up 0.85 today at 137.05 with 10y Bund yields down -7.9bp at 2.225% and Schatz yields down -2.2bp at 2.618%.
• Gilt futures are up 0.88 today at 102.75 with 10y yields down -8.3bp at 3.472% and 2y yields down -4.9bp at 3.399%.