Softer Inflation Expectations Boost Bunds, With Powell Awaited

Treasuries, Bunds and Gilts have strengthened in early Tuesday trade, though within Monday's ranges. The focus of the session is Fed Chair Powell's semi-annual testimony before the Senate Banking Committee (1000ET/1500GMT).

• Bunds are outperforming despite stronger-than-expected German factory orders, pushing to session highs after the ECB's monthly Consumer Expectations survey showed a sharp pullback in inflation expectations.
• ECB terminal hike pricing briefly ticked to a fresh cycle high above 4.10% before pulling back sharply after the ECB survey release (last 4.05%).
• Comments by BoE hawk Mann brought little new; Gilt reaction was limited.
• A fairly quiet US data slate, with Wholesale Inventories and the Fed's Consumer Credit release.
• The month's coupon issuance begins with $40B 3Y Note sale at 1300ET.

Latest levels:

• Jun 10-Yr US Tsy futures (TY) up 10.5/32 at 111-10 (L: 111-00 / H: 111-12)
• Jun Bund futures (RX) up 57 ticks at 131.48 (L: 130.61 / H: 131.78)
• Jun Gilt futures (G) up 45 ticks at 100.42 (L: 99.77 / H: 100.62)
• Italy / German 10-Yr spread 3.2bps tighter at 179.4bps