Stabilising After Yesterday’s Sell Off

Core global FI markets have recovered from yesterday’s lows/yield highs, but the move remains modest.

• Lower oil prices may be providing some light support.
• Bund futures +26 at 134.39.
• Initial support at the 20-day EMA (133.99 today) was untouched during yesterday’s sell off, leaving the bullish technical theme intact. First resistance at the Aug 14 high (135.17).
• German yields 2-3bp lower across the curve.
• 10-Year EGB spreads to Bunds little changed, consolidating the recent tightening move that has coincided with the easing of recession worry/pricing of Fed cuts moving away from last week’s dovish extremes.
• Gilt futures +17 at 100.00.
• Initial resistance at the Aug 14 high (100.80), while initial support at the 20-day EMA (99.44) remains untouched, leaving the bullish technical backdrop in play.
• Curve twist flattens, yields +2bp to -3bp.
• Modest dovish repricing in ECB-dated OIS on the day, ~66bp of ’24 cuts priced.
• BoE-dated OIS pricing broadly unchanged, showing ~40bp of ’24 cuts.
• Both markets comfortably off last week’s risk-off dovish extremes (~95bp & near 70bp, respectively).
• Pre-weekend focus set to fall on the wider risk backdrop, U.S. UoM sentiment survey and Fedspeak.