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Reversing yesterday's gains ahead of ISM services

BOND SUMMARY

Core fixed income has been under some pressure this morning, reversing yesterday's gains. Treasury, Bund and gilt futures are now close to levels seen around Tuesday's close.

  • This morning saw Spanish and Italian services PMIs come in a bit better than expected while final PMI prints from Germany, France, the Eurozone and UK were generally in line or marginally higher.
  • The focus on the data front now switches to the ISM services, although it is the subcomponents that will probably be more market moving than the headline. The employment component was closely watched in the manufacturing print earlier this week, and if that shows similar weakness it will set the tone for a weaker payrolls number tomorrow.
  • In terms of speakers, the Fed's Bostic, Kaplan, Harker and Quarles all make apparances post-ISM while BOE's Bailey is due to speak at the Green Swan conference on "How in practice can the financial sector take immediate action against climate change-related risks".
  • On the supply front, France sold E4.96bln of nominals and E511mln of linkers while France sold E11bln of LT OATs (including 1.8bln of the Jun-44 Green OAT).
  • TY1 futures are down -0-2+ today at 131-27+ with 10y UST yields up 1.1bp at 1.599% and 2y yields up 0.2bp at 0.148%.
  • Bund futures are down -0.18 today at 169.97 with 10y Bund yields up 1.3bp at -0.186% and Schatz yields unch at -0.670%.
  • Gilt futures are down -0.23 today at 126.95 with 10y yields up 2.4bp at 0.822% and 2y yields up 1.6bp at 0.071%.

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