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Under Pressure Following Overnight Schnabel Remarks

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Core/semi-core EGBs continue to exhibit weakness, with Bunds now below their pre-US-CPI/retail sales levels from Wednesday.

  • Overnight, ECB Executive Board member Schnabel told Nikkei that a July rate cut was unlikely based on current data, which appears to have weighed on the EGB space this morning.
  • While this view is consistent with market pricing (OIS price just 6bps of sequential cuts through the July meeting), it is one of the few times in recent weeks where a July cut has been explicitly noted as unlikely by ECB speakers.
  • Eurozone final HICP confirmed flash estimates at 2.4% Y/Y, though more interest will lie in the ECB’s underlying inflation metrics, due for release later today.
  • Bunds are -52 ticks at 131.06, while the German and French cash curves have bear steepened. 10-year periphery spreads to Bunds are little changed.
  • With no other notable data scheduled for today, focus will rest on scheduled ECB (Vasle, Holzmann and Kazaks) and Fed speakers this afternoon.
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Core/semi-core EGBs continue to exhibit weakness, with Bunds now below their pre-US-CPI/retail sales levels from Wednesday.

  • Overnight, ECB Executive Board member Schnabel told Nikkei that a July rate cut was unlikely based on current data, which appears to have weighed on the EGB space this morning.
  • While this view is consistent with market pricing (OIS price just 6bps of sequential cuts through the July meeting), it is one of the few times in recent weeks where a July cut has been explicitly noted as unlikely by ECB speakers.
  • Eurozone final HICP confirmed flash estimates at 2.4% Y/Y, though more interest will lie in the ECB’s underlying inflation metrics, due for release later today.
  • Bunds are -52 ticks at 131.06, while the German and French cash curves have bear steepened. 10-year periphery spreads to Bunds are little changed.
  • With no other notable data scheduled for today, focus will rest on scheduled ECB (Vasle, Holzmann and Kazaks) and Fed speakers this afternoon.