Yields Hold Higher On The Day, NFPs & BoE’s Pill Eyed Later

A relatively contained round of trade for core global FI markets early on Friday, with the pullback from yesterday’s U.S. regional banking sector worry-/data-inspired best levels generally developing a little further.

• Broader macro focus remains on the impending U.S. NFP release.
• The previously covered swings in Chinese equity markets garnered most of the early European attention on the news flow front, although failed to factor into core global FI price swings.
• Bund futures sit ~15 ticks above worst levels, last showing -57 at 135.68. Benchmark German yields are 1-5bp higher across the curve, with some bear flattening seen.
• 10-Year EGB spreads to Bunds are generally little changed to a touch tighter on the day with some modest outperformance seen for peripherals alongside an uptick in equity benchmarks.
• Gilt futures are -57 at 99.93, ~15 ticks off lows, while cash gilt yields run 3-8bp higher on the day as the curve bear flattens. An uptick in Citi/YouGov inflation expectations surrounding the geopolitical tension in the Middle East added a local input to the pressure. BoE chief economist Pill will speak later today (12:15 London).
• Both EUR & GBP STIR markets operate off yesterday’s dovish session extremes, with the ECB-dated OIS strip showing ~139bp of cuts through ’24, while the BoE-dated OIS strip shows ~107bp of cuts over the same horizon. These moves factor into the bear flattening of the curves outlined above.