Tsys Bear Steeper In Return To Cash Trade, As Gilts Partially Recover

The US curve is modestly bear steeper in the return to cash trade after Monday's holiday, catching up to moves in futures and in Europe. Bunds and Gilts meanwhile have unwound some of Monday's selloff, with the German and UK curves bull flattening.

• The UK move is in some contrast to the sharp bear flattening prior, which included one of the weakest days of 2023 for the short end (2Y yields touched a fresh post-2008 high before pulling back). That said, Gilts are off highs slightly after a mediocre auction of new Jun-28.
• Central bank hike pricing sits fairly flat on the day, with BoE terminal implied standing out at -4bp on the day (at 5.91%, still well above the 5.84% at the end of last week).
• EGB periphery spreads are mostly tighter, led by Italy, which had led spreads wider on Monday.
• Data has been 2nd/3rd tier: Euro current account surplus pulling back sharply in April vs Mar, albeit construction was decent after a weak month. US housing data is the highlight for the rest of the session.
• Today's ECB speakers haven't brought much new - reminder that MNI hosts Lithuania's Simkus in a live event at 0900ET/1400UK. For the Fed: Bullard, Williams and Barr appear later.

Latest levels:

• * Sep US 10Y futures (TY) down 4.5/32 at 112-29 (L: 112-23 / H: 113-7.5)
• Sep Bund futures (RX) up 24 ticks at 132.65 (L: 132.54 / H: 132.94)
• Sep Gilt futures (G) up 29 ticks at 94.24 (L: 93.88 / H: 94.52)
• Italy / German 10-Yr spread 1.9bps tighter at 158.5bps