Two "I"s: Inflation and Issuance

The focus for fixed income markets this morning is on the two "I"s: inflation and issuance.

• The data calendar has already seen final prints of German and French HICP (in line with the flash estimates) but the real focus of the day will be on US CPI. The Bloomberg consensus looks for 0.5% M/M headline reading (although only 31/68 analysts forecast the 0.5% figure). There are almost as many forecasts for 0.4% and 0.6% with slightly more going for the higher print. For the ex-food and energy print, analysts are split between 0.4% and 0.5% M/M.
• It has also been a big day for issuance. The EU has held a dual-tranche transaction, selling E5.25bln of 10-year EFSM/MFA and E10bln of 20-year NGEU bonds. The UK a GBP7bln syndication for its new 1.125% Jan-39 gilt. The Netherlands and Italy have also held auctions for E2.42bln and E9bln respectively. Germany is still due to sell Schatz for E5bln and the US will reopen its 30-year bond for USD24bln.
• Against this backdrop core fixed income is largely unchanged on the day.
• TY1 futures are down -0-0+ today at 133-12+ with 10y UST yields down -0.1bp at 1.365% and 2y yields up 0.4bp at 0.232%.
• Bund futures are up 0.01 today at 174.06 with 10y Bund yields down -0.3bp at -0.299% and Schatz yields up 0.2bp at -0.676%.
• Gilt futures are down -0.02 today at 128.92 with 10y yields down -0.6bp at 0.644% and 2y yields down -1.0bp at 0.078%.