Outrights Cheapen, GGBs Widen

Early weakness in benchmark European & UK bond futures failed to provide meaningful breaks below round number support (130.00 for Bunds & 95.00 for gilts), before a tick away from cheaps.

• Weekend comments from various ECB Governing Council members pushed back against the idea of near-dated rate cuts, while some more hawkish comments (Holzmann & Kazimir) stressed that we may not have reached terminal rate levels.
• Impetus from the back end of last week and another ’23 high for crude oil futures (although they are off best levels, last trading around flat) were eyed initially.
• German cash benchmarks run 0.5-1.5bp cheaper, Bund futures -15.
• GGBs widening noted in 10s. Moody’s two-notch rating upgrade of Greece to one step below IG (in line with Fitch & S&P) was probably the best that the country could have hoped for in one step. Still, the ‘stable’ outlook will have disappointed participants and is aiding the widening.
• Gilt benchmarks are 1.5-3.5bp cheaper across the curve, futures -30.
• UK headline flow has focused on familiar areas, with participants eying this week’s domestic CPI data and BoE monetary policy decision (~21bp of tightening priced, ~39bp of cumulative tightening priced for current cycle).
• Gilts widen vs. Bunds across the curve.