Light Twist Flattening Early Today, Corporate Supply & ECB’s Knot Eyed

Bunds recover from worst levels of the day, even with the impending round of 10-year 2.60% Aug-33 supply eyed (EUR5bn).

• Another swift start to the day for €IG supply and overhang surrounding Bund supply were touted as early sources of pressure for the space, which saw Bunds back from their post-German factory orders highs (prints were softer than expected).
• Initial hawkish comments from ECB’s Knot provided some knee-jerk cheapening, before the details surrounding some of his more guarded/non-committal musings allowed the space to base.
• ECB-dated OIS pricing is little changed to a touch firmer on the day post-Knot, off initial highs.
• A downtick in oil & global equity benchmarks will have supported the longer end a little.
• Bunds last -15, around 40 ticks off lows.
• German cash benchmarks run 1bp cheaper to 0.5bp richer, twist flattening.
• The German 5s30s curve moves back from yesterday’s multi-week steeps.
• Most closely watched EGB curves see similar moves.
• While most of the core/semi-core spreads vs. Bunds are little changed on the day, BTPs and GGBs narrow, with the former outperforming peers.