Pressured By PMIs, Healthy Demand At European Syndications

Core global FI markets operate a little above early Tuesday lows.

• The belly of the curve leads the sell off in Bunds, with yields there little changed to 2bp higher on the day. Bund futures initially showed above Monday’s high, before fading back into yesterday’s range.
• 10-Year EGB spreads are little changed to a touch tighter vs. Bunds.
• European and UK PMI data revealed firmer-than-expected services readings and softer-than-expected manufacturing prints, resulting in firmer-than-expected composite outcomes.
• Digging into the details, some signs of sticky services inflation pressures may complicate the ECB’s easing path beyond the widely telegraphed June cut.
• Note that ECB VP de Guindos remained non-committal beyond the idea of a June cut in early Tuesday comments.
• Gilts bear flatten, with the updated gilt remit seeing greater increases for the short- and medium-term buckets when it comes to filling the funding gap. Yields are 1-4bp higher across the curve.
• Meanwhile, the UK PMI data showed some signs of easing services inflation, albeit from a higher base level than the Eurozone.
• Comments from BoE’s Haskel haven’t impacted gilts.
• The bookbuilds for the EU & Finnish syndications show healthy demand. We remain on the lookout for further opportunistic EGB issuance via syndications.
• Looking ahead, comments from BoE’s Pill, as well as ECB’s Nagel & Panetta are due.