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Move Lower In German CPI Expectations & Softer Crude Oil Underpin Gilts & Bunds


The pull lower in crude oil markets has helped underpin the early bid in Bunds and Gilts, with any selling related to firmer than expected Italian CPI data negated in a relatively swift manner on the combination of the weakness in crude and a ratcheting lower in expectations for the German CPI release.

  • A quick reminder that we have pencilled in a headline German CPI rise of +6.12% Y/Y based on regional CPI prints that account for 88.0% of the weighting within the national print, this compares to a BBG survey median of +6.5%.
  • The belly to intermediate zone outperforms on the German FI curve, with 6-9bp of richening seen across the wider benchmarks. Bund futures failed to push meaningfully beyond the May 16 high, only bettering that level by 2 ticks thus far, before backing away from best levels.
  • Meanwhile, Gilts see 7-11bp of richening as that curve bull steepens.
  • Terminal ECB pricing consolidates just below 3.75% in ECB deposit rate terms, while terminal BoE pricing shows just shy of 5.50%, both printing shy of recent peaks.
  • Outside of German CPI, comments from BoE’s Mann & ECB’s Holzmann round off the regional risk event calendar this afternoon.
MNI London Bureau | +44 0203-865-3809 |
MNI London Bureau | +44 0203-865-3809 |

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