Reverse Early Gains; Peripheries Outperform Again

Bund and OAT futures hover around session lows as global FI markets have moved away from best levels over the course of Tuesday morning.

• Well-received 20Y US Tsy and JGB auctions overnight prompted the initial firmness, while comments from ECB's Villeroy at the Society of Professional Economists' dinner r.e. downplaying the "last-mile" on inflation will have also provided support.
• However, Villeroy also noted that ECB PEPP reinvestments could end earlier than December 2024 and still be consistent with the overall monetary stance, which may have capped the initial rally and pushed markets off highs.
• The main support in Bund futures is seen at 130.47 - yesterday's low and the 15 Nov close. Futures sit at 130.88 at typing, up +0.20 ticks.
• Core/semi-core cash curves are seen lightly twist flattening, with 10Y Bund yields down -1.5bp at 2.595% and Schatz yields up 0.4bp at 3.013%. The E3.5bln Bobl auction this morning represents 29.8k Bobl equivalent, indicating pressure should be limited going into the cut-off.
• Periphery spreads to Bunds are once again tighter, as effects from last Friday's positives ratings decisions for Italy and Portugal continue to provide support.
• Today's morning docket is very light, though ECB hawk Simkus is speaking presently and noted little reason to hike in December.
• Comments from ECB's Lagarde (subject "Inflation kills democracy"), Schnabel (subject "Monetary policy in times of stubborn inflation") and Centeno (subject "Fiscal Policy vs Monetary Policy") are due this afternoon.