Off Cheaps

Spill over from block buying flow in U.S. TY futures, some stabilisation in gilts and comments from ECB’s Stournaras help EGBs stabilise.

• Stournaras pointed to peak rates being reached, while he also assigned larger risks to doing too much on tightening, as opposed to too little and intimated that the ECB needs to hold rates at peak levels for a few month (perhaps no surprise given that he is a dove, but worth noting nonetheless).
• Meanwhile, Governing Council member Wunsch has continued his journey towards the centre of the ECB (he has historically been a hawk), failing to push the case for further rate hikes.
• Similarly, Governing Council member Knot (and usual hawk) noted that he is comfortable with current interest rate levels, while also stating that he doesn’t expect a rate hike at the next gathering.
• Bund futures had moved through recent lows as 10-Year yields tagged fresh cycle highs, before running out of steam a little ahead of round number support at 129.00 (low of 129.11).
• The contract last shows -50, with cash benchmarks back to 3.5-5.0bp cheaper on the day.
• Peripherals hold wider on the day vs. Bunds.