Short-End Yields Retrace As BoC Hike Implications Digested

Treasury, Bund and Gilt futures are weaker but have recovered slightly after hitting fresh June lows in early European trade Thursday. The major curves are twist steepening, after some bear flattening seen earlier on.

• Short end yields have pulled back from multi-week/month highs as markets continue to digest the implications of Wednesday's surprise hike from the BoC which triggered selling across the global rates complex. (For this reason, an appearance by BoC Deputy Gov Beaudry later today will garner more attention than would usually be the case).
• Rest-of-cycle rate hike expectations have pulled back slightly on the day (led by the BoE, -5bp after Wed's +7bp).
• Downwardly-revised GDP data showed the eurozone was in technical recession in Q4-Q1, but there was no reaction as this had been telegraphed by earlier national (mainly German) readings.
• US jobless claims are the scheduled highlight for the remainder of the session, with few speakers of note, and much of Europe on holiday.
• A much quieter session for issuance this morning saw merely an Irish 10-30Y auction. There will be attention later in the session on Treasury's announcements for next week's auctions, including a new 6-week cash management bill.

Latest levels:

• Sep US 10Y futures (TY) down 4/32 at 113-03 (L: 112-30 / H: 113-7.5)
• Sep Bund futures (RX) down 21 ticks at 133.28 (L: 132.97 / H: 133.5)
• Sep Gilt futures (G) down 50 ticks at 95.7 (L: 95.61 / H: 95.94)
• Italy / German 10-Yr spread 2.6bps tighter at 180.1bps