Lower As Global Matters & Issuance Weigh

Late Tuesday weakness in Tsys and Australian CPI data provided some pre-London weakness. Focus on EGB & gilt supply then added further pressure.

• Slightly firmer-than-expected German IFO data also factored in, although all three major metrics remain comfortably below 100.
• Bund futures haven’t tested Monday’s low, last ~40 ticks lower. German cash yields are 3-4bp higher today. 10s are under the most pressure ahead of the impending Bund auction results.
• Peripheral EGBs are a little wider vs. Bunds. Click for more on that.
• Gilt futures are through initial support (99.45), leaving bearish focus on the cycle low (96.01). Contract last -40.
• Cash gilt yields are 4-6bp higher on the day, bear flattening.
• Modest hawkish adjustments have been seen in STIR pricing covering both the BoE & ECB, although familiar ranges remain intact.
• ECB-dated OIS shows ~75bp of cuts through ’24, while BoE contracts show ~50bp of cuts over the same horizon.
• Comments from ECB’s Nagel (hawk) didn’t really move the needle. He will seemingly support the consensus view of a June cut if the data allows, but was not willing to commit to a pre-prescribed cutting cycle beyond there and is sceptical re: the inflation trajectory.