Spreads A Little Tighter to Bunds

Bund futures sit a little below Friday’s late levels, last -42 at 132.65.

• Friday’s high (133.21) provides initial resistance, with a double bottom pattern formed in the contract.
• Bears need to force a break below the 20- & 50-day EMAs to start turning the technical tide more in their favour.
• German yields are 1-3bp higher across the curve, steepening.
• German ASWs are off last week’s risk-off wides, sitting a little narrower on the day.
• Some tension within the French political left’s election alliance and apparent assurances from RN leader Le Pen removed a little of the French political uncertainty premium.
• A benchmark OAT roll skews the optics surrounding spreads, but the 10-Year OAT/Bund spread is ~1bp tighter on the day, last showing a touch above 80bp.
• Recent source reports from BBG and RTRS have played down the likelihood of ECB action when it comes to containing the spread widening for OATs.
• Broader EGB spreads are tighter vs. Bunds on the day, with peripherals outperforming, narrowing by ~2bp.
• ECB speak continues to point to data-dependence, albeit with the likes of chief economist Lane playing down the odds of a cut at the July meeting.
• ~2bp of easing is priced through that meeting, with ~17bp of cuts then priced through September and ~43bp of cuts showing through the end of ’24.
• ECB’s de Guindos and Makhlouf will speak this afternoon.
• Final Q1 Eurozone labour cost data was a touch firmer than the preliminary print (+5.1% Y/Y).