Mixed NFP Report Provides Plenty Of Two-Way Flow In Core European Bonds

A notably firmer than expected headline U.S. NFP print (accompanied with positive revisions to recent months) initially biased core EGBs & Gilts cheaper, before a bounce from fresh cheaps in Tsys on the larger than expected uptick in unemployment (driven by a meaningful fall in the number employed on the household survey side of the equation, which the unemployment rate is based on) and slightly softer than expected AHE data (including a negative revision to the prior M/M reading) provided support. Fresh weakness has worked its way back in as we go to print, with TY futures marking fresh session lows.

• Bund & Gilt futures operate a little above session lows registered post-data, although previously outlined technical support in Bund futures has held up pretty well thus far (being retested at typing)r.
• Bear flattening remains the dominant theme on the Bund & Gilt curves.
• Peripheral tightening vs. Bunds at the 10-Year point has become more pronounced vs. what we flagged earlier, with 2-5bp of compression seen across the major 10-Year spreads on that front.