Weakness In EGBs & Gilts, Tsys Outperform

TY futures respect their early range as ECB speak and a downtick in equities impact price action. Cash Tsys sit 1-2bp richer. FOMC-dated OIS pricing continues to indicate that the tightening cycle is complete, with just over 70bp of cuts priced by year-end.

• EGBs also moved off session cheaps although inflation worry within the hawkish wing of the ECB’s governing council capped the bid and allowed ECB-dated OIS to firm incrementally, with fresh pressure kicking in during recent trade. Peripheral 10s are wider on the ECB speak, with BTPs and Greek paper widening the most.
• Post-long weekend catch up biased Gilt futures lower, before the weakness in broader equity markets supported. Subsequent weakness in EGBs has applied fresh pressure, with Gilt futures breaking below Friday’s post-NFP low. Cash Gilts are 4-5bp cheaper across the curve. Terminal BoE pricing hovers in the familiar 4.90-5.00% window, with a 25bp hike more than 90% priced for this week’s gathering.
• Comments from Fed’s Jefferson & Williams, along with continued ECB speak, present the highlights during the remainder of the session. Elsewhere, there will be one eye on the Russian Victory Day holiday, although Putin’s early comments didn’t provide much for markets to trade off.

Latest levels:

- TY1 futures are up 0-5 today at 115-10+ with 10y UST yields down -1.2bp at 3.498% and 2y yields down -1.6bp at 3.987%.

- Bund futures are down -0.08 today at 135.46 with 10y Bund yields up 1.0bp at 2.327% and Schatz yields up 0.9bp at 2.615%.

- Gilt futures are down -0.43 today at 100.50 with 10y yields up 4.2bp at 3.819% and 2y yields up 4.4bp at 3.819%.