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UniCredit on Italy's Q4 supply




Gilt/Bund spreads widest since 2019


Large Bund put spread

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There will be focus on UK inflation data due at 7:00BST.

  • Consensus is looking for an increase in the Y/Y print from 2.0% to 2.9%.
  • A large part of the increase is due to base effects with last year's "Eat Out to Help Out" and reduced VAT depressing August 2020's CPI print. Indeed, if the M/M CPI print was flat, the Y/Y CPI print would increase to 2.5%.
  • Consensus isn't looking for a flat M/M print, however, it looks for a 0.5% print.
  • Given market pricing for next year, it does seem that a higher than expected print would have a larger market reaction than a lower print.
  • However, this is with the caveat that over a third of economists in the Bloomberg survey expect a beat. So we would probably need to see a print of 3.1% to have a large market impact.