Off Cheaps, BTPs Tighten Vs. Bunds, Looming Ratings Updates Eyed

Bund futures have faded from best levels, although the contract remains in a tight range a little above yesterday’s low, last +15.

• A light bid in equities has helped capped the early morning rally.
• German cash benchmarks are 4bp lower to 1bp higher, twist steepening as the space assesses the global impulses flagged elsewhere.
• EGB spreads are generally little changed to a touch tighter vs. Bunds. BTP spreads briefly moved back below 200bp after the spread got close to 210bp yesterday.
• While there is no data of note and the ECB is in its pre-meeting quiet period, there is plenty of sovereign rating interest evident.
• There are some worries evident re: the Italian fiscal situation (which could trigger an outlook switch to negative at S&P later), but this seems to have pared back over the last 24 hours. Some will suggest that early comments from the ratings agency to the Italian government may have filtered out to some quarters.
• Elsewhere, Greece may receive its first IG status recognition at one of the ‘big 3’ ratings agencies (S&P this evening). Such a development won’t be a mover re: GGB inclusion in the major bond indices, but would no doubt be a welcome development for GGBs. Such a move would also trigger inflows from funds that require IG status at one of the big three agencies.