Lower Following Central Bank Rate Cut Repricing

Core/semi-core EGBs are off lows but remain weaker alongside core FI peers this morning, as rate cut expectations across the Fed/BoE/ECB have pulled back.

• Spillover from yesterday’s higher-than-expected US CPI report continues to set the tone.
• Ahead of today’s meeting, ECB-dated OIS contracts price 75bps of cuts through the remainder of ’24, down from around 90bps before last week’s US NFP report.
• Bunds are -33 ticks at 131.61. Attention is on key support at 131.23, the Feb 29 low. Clearance of this level would confirm a resumption of the downtrend that started late last year.
• German cash yields are 1 to 2 bps higher today, with 5/10-year tenors underperforming.
• The 10-year BTP/Bund spread is 1.4bps wider at 138.6bps, with today’s 3/7/15-year BTP supply likely weighing into bidding deadline.
• In the midst of the ECB decision/press conference, US PPI will also garner cross-market interest at 1330BST/1430CET following yesterday’s CPI report.