Typically Dovish Comments From Stournaras Help Bonds Off Early Lows

EGBs have stabilised after an early move lower.

• Bund futures -14 at 132.59. German yields -1bp to +1bp, curve twist steepens.
• Typically dovish comments from ECB’s Stournaras pushed EGBs off lows, as he pointed to the need for 2 pre-summer break rate cuts, followed by 2 more before year end.
• The comments didn’t have a major impact on EUR STIRs, as he endorsed market pricing.
• ECB-dated OIS shows ~92bp of ’24 cuts vs.~90bp pre-Stournaras.
• The recent run of impressive BTP demand extends further, taking the 10-Year BTP/Bund spread below 120bp. The spread has not closed sub-120bp since Nov ’21.
• Familiar discussions re: carry and expectations for ECB easing continue to dominate there.
• Gilts came under modest pressure at the open, generally tracking broader core global FI peers.
• Futures last -18 at 99.00, with the bullish recovery losing momentum in the last few sessions.
• Cash gilt yields are 1bp lower to 1bp higher, 10s consolidate above 4.00%.
• BoE-dated OIS shows ~65bp of ’24 cuts, little changed on the day.
• Comments from ECB’s Schnabel will come under scrutiny later today, following the publication of the Bank’s framework review.
• Several other ECB speakers are due, while retail sales, PPI & weekly jobless claims data headline the U.S. calendar.