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Lower, but some reversal after inflation data


Core fixed income had been trending lower through most of the European morning session but the release of European inflation data at 10:00GMT / 5:00ET has seen the selloff stall with Bunds and gilts retracing a large portion of their moves lower today. This has happened despite the headline data coming in 0.8ppt above the early economic consensus expectations. We had thought that market expectations would be close to the level of the actual release but it appears there may have been some investors positioning for an even higher print.

  • Later today the focus will turn to US data with the employment report and ISM manufacturing both due for release. Although less market moving than CPI at present, these are both still potential market movers.
  • There is also focus on any further escalation of the Russia-EU escalation over gas payments.
  • TY1 futures are down -0-23 today at 122-05 with 10y UST yields up 6.0bp at 2.401% and 2y yields up 4.9bp at 2.386%.
  • Bund futures are down -0.22 today at 158.44 with 10y Bund yields up 2.1bp at 0.566% and Schatz yields up 1.7bp at -0.63%.
  • Gilt futures are down -0.16 today at 121.07 with 10y yields up 3.0bp at 1.639% and 2y yields up 2.5bp at 1.369%.

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