“Significant” Shift Higher In ECB Consumer Inflation Exp. Pushes Bund Futures Back To Flat

EGBs pull away from session bests after the latest ECB consumer inflation survey (click for full release) noted that “consumer inflation expectations increased significantly.”

• The upturn in the 1- & 3-Year inflation expectations surveys didn’t match/result in fresh cycle highs for the median metrics (adjusting to 5.0% for the 1-Year & 2.9% for the 3-Year), although the 3-Year measure neared the cycle peak, which will worry at least some at the ECB, particularly given the already apparent stickiness of core inflation.
• A light twist flattening bias is now evident on the Bund & OAT curves. Peripheral 10s are flat to a touch wider vs. Bunds. The major German FI futures contracts are essentially flat on the day, with the Bund contract ~35 ticks off best levels.