Peripherals Biased Wider, Before Oil Weakness & Softer Than Expected Italian CPI Lend Support

Peripherals have been biased wider vs. Bunds at the 10-Year point owing to this morning’s BBG sources piece which suggested that “some hawkish European Central Bank officials are pondering options to speed up the reduction of the institution’s €5 trillion stash of bonds.”

• The lack of broad, top-level discussion on the matter, per the same sources piece, as well as the apparent lack of agreement on how such a move would unfold, has probably limited broader market reaction.
• Subsequent ECB speak has been vague on that front, while various ECB speakers have generally reiterated their previously outlined views.
• Softer than expected Italian CPI data has capped the widening moves in recent trade, with weakness in crude oil futures and the data providing a bid in outright European FI dealing.
• Bund futures have moved to fresh session highs as a result, after a brief and limited foray below previous week to date lows early in the session. Cash Bunds see 1-3bp of richening, with light bull steepening in play. The remainder of the core-/semi-core EGB space is generally flat to a touch richer, while peripherals are more mixed given the aforementioned ECB sources piece.
• Italian critique of ECB policy remains evident, with PM Meloni the latest to criticise the Bank’s hiking cycle.