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Remain Firmer Following Dovish BoJ; Peripheries Mixed

EGBS

Core/semi-core EGBs sit firmer this morning as dovish impulses from JGBs continue to feed through.

  • Today's BoJ decision saw a lack of commitment to future policy normalisation.
  • Elsewhere, the 2024 German funding plan came out broadly in line with expectations while Eurozone November final HICP confirmed flash estimates on the annual print. Neither of those meaningfully impacted markets.
  • That leaves Bunds up 51 ticks at 137.25, still below yesterday's high of 137.49. The German cash curve bull flattens with 2s10s down -2.5bps at -49.5.
  • Periphery spreads are mixed, with the BTP/Bund spread 1.9bps tighter at 166.4bps and the GGB/Bund spread 2.2bps wider at 114.0bps.
  • ECB-speak has continued to push back on current rate cut pricing, with Simkus unsurprisingly weighing in on the hawkish side (re: market rate cut pricing being optimistic). Earlier today, Villeroy presented remarks that may be inferred as slightly less dovish than previously (re: rate cuts only coming after a "plateau" at current levels).
  • Despite this, ECB-dated OIS contracts still price over 150bps of cuts through 2024.
  • The remainder of today's docket is light.
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