Underpinned As PMIs Amplify Overtightening Fear

EGBs remain underpinned in the way of the full suite of European flash PMIs, with the downside surprises seen in the totality of the releases doing little to placate worry re: ECB overtightening.

• Bund futures are ~150 ticks firmer on the day, a touch off best levels, while the 2-/10-Year German curve moves to fresh multi-decade inverted extremes. Cash Bund trade sees 11-15bp of richening with 5s the outperformer.
• The remainder of the core/semi-core EGB curves see similar moves.
• Greek paper widens at the 10-Year point (~2bp), after the recent, well-documented run of tightening, which was most recently aided by expectations for Greece’s ruling party to sow up a majority in the second round of national elections (which will be held over the weekend), while the remainder of the periphery is incrementally tighter vs. Bunds at the 10-Year point.
• ECB terminal rate pricing shows back below 4.00% (in deposit rate terms) after yesterday’s close above that level.