Smoothly Digested Supply Adds to Earlier Bounce, Long End Unwinds Underperformance

Bunds firm on smooth passage (upticks in cover ratio vs. prev. and average prices conducted comfortably above pre-auction mids) of this morning’s dual long end auction and the removal of delta hedging pressure surrounding that event. This has allowed the previously outlined richening, which came in the wake of ECB President Lagarde’s comments and alongside a post-auction firming in Gilts, to develop further. The long end of the curve has unwound the pre-auction underperformance as the major cash benchmarks sit 3bp richer on the day. Bund futures sit just shy of fresh session bests, printing a touch over 20 ticks firmer vs. settlement.