Weakness In Tsys Weighs On EGBs & Gilts

Selling in the front end/belly of the U.S. Tsy curve (stemming from futures flow) caps the Gilt-driven rally in UK/core EGBs, leaving cash Gilts running 4.5bp richer to 3bp cheaper, twist steepening, while Gilt futures -10.

• Bund futures are -40. Threatening a clean break of early cheaps after a look below, while wider cash trade in Germany sees 1.5-3.0bp of cheapening as the belly leads the weakness.
• Core/semi-core EGBs are little changed to a touch wider vs. 10-Year Bunds, with the belly leading the weakness in most instances, outside of the Finnish curve which has seen some bear flattening.
• Peripheral paper is still little changed to wider vs. 10-Year Bunds on the day, with the syndication announcement-linked ~10bp widening in GGBs is clearly the most pronounced (albeit back from session wides). BTP futures hit fresh session lows on the wider selling.