Thursday’s Cheapening Impetus Prevails

Core global FI markets extended yesterday’s U.S. data-driven cheapening move this morning, with no fresh fundamental catalysts observed. Yesterday’s lows in TY, Bund and Gilt futures have all given way.

• There hasn’t been much in the way of tangible reaction to Eurozone CPI data, which was a touch softer than expected (at least vs. the BBG survey), with the previously released national data readings holding the explanatory power.
• Bonds have generally found a bit of a base in recent trade,
• The Bund curve has seen some light bull steepening, with the major benchmarks 1-2bp cheaper, similar moves have been seen across the bulk of the core/semi-core EGB markets.
• The major 10-Year EGB peripheral spreads are little changed across the curve, with the presence of the now delivered Italian supply providing a domestic headwind for BTPs pre-auction.
• Weakness in Gilts has been more pronounced than that seen in Bunds, running 2.5-5.0bp cheaper as the curve bear flattens alongside BoE terminal rate pricing moving back to ~6.30%.
• Tsys bear flatten, as the major benchmarks cheapen by 2-5bp, with yields showing through their respective Thursday highs.
• U.S. PCE & MNI Chicago PMI data headline ahead of the weekend.

Latest levels:

• Sep Bund futures (RX) down 32 ticks at 133.32 (L: 133.09 / H: 133.75)
• Sep Gilt futures (G) down 73 ticks at 94.91 (L: 94.71 / H: 95.45)