Risk On Tone Sees Core FI Retreat

A largely risk-on tone early Thursday has seen core FI weaken for the most part, with Gilts underperforming Bunds and Treasuries.

• The overall driver has been the continued retracement in energy prices since yesterday, with oil prices falling ~2% helping boost equities. A temporary resolution over the US debt limit also helping.
• While breakevens have pared recent gains, real yields have ticked higher (particularly in the UK, with initial comments from new Chief Econ Pill).
• Periphery EGB spreads have tightened, with ECB's Stournaras pushing against market rate hike pricing, and a BBG sources story on the ECB considering a new post-crisis bond-buying program.
• Ahead in the session are US initial jobless claims, the ECB minutes and Lane, Holzmann, Schnabel comments, while we also hear from Cleveland Fed's Mester.

Latest levels:

• Dec US 10-Yr futures (TY) down 2/32 at 131-21 (L: 131-17 / H: 131-25)
• Dec Bund futures (RX) up 3 ticks at 169.68 (L: 169.4 / H: 169.92)
• Dec Gilt futures (G) down 10 ticks at 124.69 (L: 124.6 / H: 125.19)
• Italy / German 10-Yr spread 3bps tighter at 104.4bps