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Lower To Start Thursday Trade

BONDS

In line to slightly-firmer-than expected European CPI data, the continued burden of supply (average demand at Spanish offering, well-received French supply), local digestion of yesterday’s FOMC decision and some marginally hawkish comments from the usually dovish ECB Governing Council member Herodotou (“we must not start easing very early because then inflationary pressures might come back... but should not delay it either because then it will affect growth”) combine to apply some pressure to EGBs this morning.

  • Bund futures sit a little off worst levels of the day, last -53. German cash yields are 4-5bp higher across the curve, with the wings leading the move.
  • 10-Year EGB spreads to Bunds are wider given the weakness in core global FI markets and most of the global equity benchmarks in the time since yesterday’s close. Tepid/average demand at the latest round of Spanish auctions also did little to support the space.
  • Gilts also soften but outperform German peers across the curve. That outperformance is likely aided by a slightly-softer-than-flash final domestic manufacturing PMI print and the previously covered fiscal commentary from the Chancellor pointing to less headroom when it comes to fiscal easing.
  • Gilt futures show -21 last, while cash gilt yields are 1-3bp higher, with the curve a touch steeper on the day.
  • The BoE decision, ECB speak and U.S. data headline through the remainder of the day.
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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