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Testing key supports

BONDS
  • The biggest driver in core FI markets this morning has been the higher-than-expected wage growth data from the UK. This has helped gilt futures move to their lowest level since July 11 while Bund futures have just breached their July 10 low to touch their lowest level since March. TY1 futures hit their lowest level since November 2022.
  • The wage data in the UK labour market report has led to a bear flattening of the gilt curve with markets now pricing in more than 30bp for the September meeting (up from 23bp pre-data) and a peak in excess of 6.00% (76bp priced by March 2023 - up 13bp on the day and up 20bp from last week's close). This is despite the rest of the report being rather disappointing.
  • 10-year Bunds have actually moved more than 10-year gilts at the time of writing - with the German curve seeing a largely parallel shift. The ZEW survey didn't move Bunds bit saw expectations improve while current conditions were worse than expected.
  • The UST curve has steepened with 2-year yields little changed.
  • Looking ahead US retail sales, Canadian CPI and US TIC flow data will be the highlights for the remainder of the session.
  • TY1 futures are down -0-9 today at 109-23 with 10y UST yields up 3.1bp at 4.224% and 2y yields down -0.1bp at 4.969%.
  • Bund futures are down -0.64 today at 130.63 with 10y Bund yields up 5.9bp at 2.694% and Schatz yields up 6.0bp at 3.128%.
  • Gilt futures are down -0.55 today at 926.63 with 10y yields up 5.2bp at 4.615% and 2y yields up 9.1bp at 5.151%.
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