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No Let Up In Morning’s Rally as ECB Pricing Drifts Lower

EGBS
  • The day’s rally shows no sign of letting up just yet, with Bunds now -7.7bps on the day, still led marginally on the day by OATs -8.0bps for core EU FI, but with Portuguese 10s outperforming with yields currently -10.4bps.
  • There is no additional impact in Spanish 10s since headlines of Sanchez calling early general elections for July 23 hit Bloomberg, still lagging the rally but down a sizeable -6.9bps.
  • There aren’t any clear headlines to pin the broader rally on but it comes with ECB-dated OIS implied rates softening with the +57.5bp of hikes to October’s (depo-equivalent) 3.82% terminal rate trimmed 3bps on the day. Having swung to fully pricing a hike for the Jun 15 meeting last week, it just about holds it with 24bp priced.

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