May 17, 2023 09:37 GMT
Leaning Bull Flatter Amid US Debt Ceiling Uncertainty
Global core FI is on the front foot in early Wednesday trade, with attention on the US debt limit impasse.
- The US, UK, and German curves are leaning slightly bull flatter, with risk appetite limited.
- That's despite some apparently constructive debt limit developments overnight, including Pres Biden's plan to shorten his trip to Asia in order to refocus on negotiations.
- The US short end is underperforming, with Fed hike pricing ticking up slightly (vs lower pricing for ECB/BoE) amid lingering doubts that the hiking cycle is over.
- Eurozone data hasn't really had an impact; final Apr HICP saw a downward revision to M/M, while French unemployment was in line. US housing starts and building permits data feature later.
- This morning's supply has included a strong Gilt auction and a decent French OAT sale. Supply later includes $15B 20Y US Tsy Bonds.
- BoE Governor Bailey, and ECB's Centeno/Guindos/Rehn are up later.
- Jun US 10Y futures (TY) up 2.5/32 at 115-0 (L: 114-28 / H: 115-2.5)
- Jun Bund futures (RX) up 38 ticks at 135.68 (L: 135.28 / H: 135.7)
- Jun Gilt futures (G) up 35 ticks at 100.78 (L: 100.41 / H: 100.79)
- Italy / German 10-Yr spread 0.7bps wider at 187.5bps
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