Looking At Month-End & Fundamental Matters Early On Thursday

{wOA reminder that sell-side estimates flagged monthly portfolio rebalancing needs as bond-supportive and equity-negative, while the lower national European CPI releases and dovish feedthrough into ECB pricing (a full 25bp cut is now discounted through the end of the April ’24 meeting) provides fundamental support/basis for outperformance for EGBs early today. Month-end extension flows are also seen as supportive for EGBs.

• We have flagged cross-market plays surrounding the recent run of BoE MPC higher for longer insistences vs. this morning’s Eurozone inflation data as a potential (partial) driver of the UK widening, although the move seems too pronounced/differentiated to not have been backed by at least some UK fundamental news (we haven’t seen any). Note that month-end index extensions surrounding gilts point to flat levels/modest contractions in duration, so there shouldn’t be any meaningful support via that channel.
• USD benefits from the dovish ECB repricing triggered by this morning’s European inflation data. A reminder that month-end models point to USD selling requirements (although such flow was already seen around Tuesday’s 10AM NY fix i.e. month-end value data, building on the direction of travel that was already in play for the broader USD at the time).
• European indices have regained some poise after seeing some light pressure, with the STOXX 50 last +0.1%. Meanwhile, U.S. e-minis are 0.1-0.4% better off.