Strong Demand At OAT & SPGB Auctions, Spreads Off Wides, Tight Ranges

German bonds are a little weaker early today, with yields 0.5-1.5bp higher across the curve, light steepening seen.

• Bund futures stick to a tight 25-tick range, last -31 at 130.64, as the pullback from yesterday’s high extends a little further.
• EGB spreads to Bunds were a little wider to start the day, owing to the presence of French and Spanish supply.
• Solid demand at those auctions has allowed spreads to move back towards unchanged.
• A reminder that the AFT had reduced the size of the LT OAT sale owing to elevated levels of political uncertainty.
• This, coupled with the reduction in odds of an RN absolute majority owing to the tacit ‘Republican Front’ election agreement, facilitated solid demand, allowing the AFT to match the top end of its target sales range.
• Softer-than-expected German factory orders had no lasting impact
• The accounts of the ECB’s June meeting are due today, with comments from ECB’s Cipollone also scheduled.
• A U.S. holiday will limit wider liquidity.