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Negative Sentiment But BTP-Bunds Spreads Narrow Further

BOND SUMMARY
  • Market sentiment has been downbeat this morning following the news that Johnson & Johnson have paused their trials of their Covid-19 vaccine after one of the study participants fell ill. Equities are a little lower and core fixed income higher.
  • Despite the generally negative sentiment, peripheral spreads are little changed with the exception of BTPs. BTP futures have continued their move higher to breach the psychologically important 150 level with BTP-Bund spreads narrowing further. Our technical analyst notes that the next resistance is at 150.74, the bull channel top drawn off the Sep 8 low. We also note that Bund futures are at their highest levels since July.
  • UK labour market data this morning was disappointing but saw little market reaction.
  • US CPI and average earnings are the data highlights for the rest of the day with BOE Governor Bailey testifying before the Lords Economic Affairs Committee.
  • TY1 futures are up 0-1+ today at 138-30+ with 10y UST yields down -2.1bp at 0.755% and 2y yields down -0.8bp at 0.148%.
  • Bund futures are up 0.11 today at 174.92 with 10y Bund yields down -0.6bp at -0.551% and Schatz yields down -0.4bp at -0.736%.
  • Gilt futures are up 0.12 today at 135.60 with 10y yields down -0.7bp at 0.263% and 2y yields down -0.3bp at -0.34%.
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