Weaker Tone Ahead Of US Payrolls

Bunds and Gilts are underperforming Treasuries in European morning trade Friday, with April's US nonfarm payrolls report the focus of the session.

• Curves are trading mixed, with modest bear steepening across cash curves as oil and equities trade with a firmer tone (helped by Apple earnings overnight).
• Notably, 10Y German yields have erased yesterday's drop, but 2Y Schatz yields remain 10bp below Thursday's opening levels with ECB terminal pricing largely sustaining Thursday's post-meeting drop.
• We've heard from a few mainly hawkish ECB voices this morning (eg Simkus and Muller), but not really impacting hike pricing.
• The Bloomberg survey median for NFP gains is 185k, with a whisper number of 181k. This will be an early test of the Fed's tentative move to the sidelines, with periphery stats like hourly earnings eyed closely. MNI preview here.
• Later in the session we hear from Fed's Bullard (with Q&A so the jobs report is likely to come up) and Cook.

Latest levels:

• Jun US 10Y futures (TY) down 14.5/32 at 116-3.5 (L: 116-3.5 / H: 116-12)
• Jun Bund futures (RX) down 68 ticks at 136.28 (L: 136.19 / H: 136.74)
• Jun Gilt futures (G) down 56 ticks at 101.28 (L: 101.24 / H: 101.71)
• Italy / German 10-Yr spread 1.3bps tighter at 191.9bps