Pullback From Overnight Highs With ECB And US Banks In Focus

Treasuries have pulled back from overnight highs with bear flattening in the curve, with European curves slightly steeper in early Thursday trade. In focus are today's ECB decision and US bank concerns.

• The mostly as-expected Fed meeting yesterday has faded in importance compared with sharp weakness in US banks overnight including PacWest, whose bullish impact on Tsys was exacerbated by an oil price fall.
• The highlight of the session is the ECB decision (MNI Preview here).
• A slight chance of a 50bp ECB hike remains priced (15%) vs the expected 25bp raise; terminal pricing is flat on the day at 3.72% (depo).
• Attention will be paid to any signals from Lagarde on how much further tightening is currently foreseen, as well as possible decisions on TLTRO bridge loans and, less likely today, a speed-up of APP portfolio reduction.
• Periphery EGB spreads are flat/slightly wider (BTPs/Bunds up 2bp).
• US jobless claims will bear some attention ahead of Friday's payrolls.

Latest levels:

• Jun US 10Y futures (TY) up 9.5/32 at 116-6.5 (L: 116-05 / H: 116-25.5)
• Jun Bund futures (RX) down 17 ticks at 136.13 (L: 135.95 / H: 136.66)
• Jun Gilt futures (G) down 28 ticks at 101.46 (L: 101.43 / H: 101.93)
• Italy / German 10-Yr spread 2.2bps wider at 189.3bps