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What to watch

  • There has been some divergence between curves this morning. The German curve has bull steepened with Schatz yields down 0.1bp but 10y Bund yields down 2.0bp while the Treasury curve has flattened with 2-year yields up 0.4bp and 10-year yields down 0.5bp at writing.
  • The moves seem to be driven by inflation expectations - with US breakevens moving higher on the day but German breakevens moving lower - with some of the move in German breakevens potentially having been overdone after concerns about natgas prices on the back of the Nord Stream 2 pipeline regulatory delays. Evolution of gas prices in Europe will continue to be watched closely.
  • In the UK, we have no MPC speakers today. Yesterday we heard from Mann but she stayed to the script in terms of outlining the BOE's forecasts rather than discussing her personal views in detail. Tomorrow will hear from BOE's Pill today. He gave away little about his voting intention on Monday (or on what would be the trigger for him to hike rates). Focus will instead be on Brexit negotiations and wider market moves.
  • On the data front, we have little of note outside of US weekly claims while we will also hear from Fed's Bostic, Williams, Evans and Daly and the ECB's Lane.
  • There will also be some attention on events in EM with the SARB expected to hike rates today but the CBRT expected to cut.

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