Off Lows, BTPs Tighten & GGBs Widen

A bounce in the Euro STOXX competes with the average to decent passage of French & Spanish supply in recent EGB trade, but those inputs generally nullify each other, leaving Bund futures around session bests, after recovering from a brief early look through yesterday’s low.

• A bid in Gilts, weaker than expected M/M domestic industrial production and a negative start for equities had provided support for Bunds earlier in the day.
• German cash benchmarks sit 2-3bp firmer with the 5- to 10-Year zone outperforming the wings.
• OAT futures have recovered from hedging/concession around the aforementioned auction process and trade just shy of session bests.
• Greek paper is a little wider in the long end, perhaps on some profit taking in compression trades ahead of tomorrow’s expected ratings update from DBRS Morningstar (although any upgrade to IG status for Greece won’t impact benchmark bond index GGB inclusion).
• Meanwhile, BTPs have unwound yesterday’s widening move, aided by the recovery in equities and some modest tightening in benchmark CDS indices. Also note that the Italian Treasury has announced that it will launch a new 5-Year retail-only BTP Valore with books open between 2-6 October (a reminder that the initial Valore offering saw strong demand).