Some Reasons For The Pullback From Richest Levels

Several factors to flag when it comes to the extension away from richest levels in core global FI markets:

• A couple of tweets from Middle Eastern newswire Al Arabiya re: the Israel-Hamas conflict noted that “A truce agreement is close to being reached, including the entry of aid to a prisoner held by Hamas” and “An imminent agreement in Gaza includes a 3-day truce.” Note that these tweets cite the newswire’s sources and have not been confirmed/denied officially.
• We also highlight that they are similar to reports run by RTRS earlier this week, although that does not mean that the market will not trade off such headlines, especially given the scope of the recent richening in core bonds.
• Gilt futures failed to break 98.00, while bulls failed to force a meaningful test of 4.00% in 10-Year cash yields, with some fatigue setting in after the recent rally. BoE-dated OIS also pares a more than negligible portion of the dovish repricing covered earlier alongside the move away from richest levels in bonds.
• Lines from ECB Governing Council member Holzmann will not have been a huge market mover, as he reiterated his typical hawkish stance (in relative terms to the rest of the GC), although they may have factored in at the margin given the previously touted dovish repricing on the ECB-dated OIS strip, which has also moderated from extremes.