Selling Pressure In Tsys Feeds Through Into EGBs & Gilts

EGBs and Gilts had firmed vs. late London morning levels, although a move away from richest levels in U.S. Tsys has started to spill over.

• Bund futures recently tagged fresh session highs, although the Gilt equivalent failed to challenge its own intraday peak, before the aforementioned selling pressure kicked in.
• The Bund curve has bull flattened, while Gilts have twist flattened (on the day).
• Peripheral EGBs are little changed to a touch tighter vs. 10-Year Bunds, within ~1bp of yesterday’s closing spread levels.
• The late morning bid in Bunds was aided by strong reception of the latest 10-Year Bund auction, which saw the highest cover ratio for the 2.30% Feb-33 Bund since its launch (albeit against slightly lower than normal nominal issuance).
• Decent to strong Gilt & OAT auctions were also noted.
• The passage of the related delta-hedging around supply removed a headwind to further gains during the aforementioned bid.
• Outside of that, regional headline flow has been light with ECB’s de Cos sticking to the dovish side of the spectrum and BoE Governor Bailey reaffirming post-meeting rhetoric.
• A quick reminder that liquidity will thin out on Thursday, owing to the observance of the Ascension Day holiday across large chunks of Europe.