BTP: Best traded Volume in 9 sessions

Curve leans steeper ahead of this morning’s long end supply, with the latest offering from the DFA set to come under heightened scrutiny after tepid/soft demand at the most recent 10-Year auction. 

• 30s registered fresh month-to-date highs at 3.659% this morning, with bears eying the cycle top at the year-to-date high (3.715%) next.
• Some underperformance for long end bonds vs. swaps noted during the recent recovery in energy prices. Commerzbank write “while the link between swap spreads and oil is not immediately apparent, we think that higher energy prices could ultimately feed into higher government expenditures, in turn causing higher funding needs.”

Energy prices remain the key intraday driver with a move back from session highs there providing background support for core global FI markets in recent trade. 

• Swedish June CPIF ex-energy inflation was a little above the Riksbank’s June MPR projection at 0.37% Y/Y (vs 0.52% prior; 0.20 Riksbank), but underlying inflation pressures remain very low. CPIF excluding energy and with constant taxes (a greater focus due to the various temporary tax policues currently impacting inflation) pulled back to 1.17% Y/Y (vs 1.33% prior). There will be another inflation report before the Riksbank’s August 20 decision.
• Major analysis groups were unchanged from the flash. Services rose to 2.92% Y/Y (vs 2.63% prior), while goods (-1.55% Y/Y vs -0.73% prior) and food (-5.16% Y/Y vs -4.69% prior) remain firmly negative.
• Within core goods, clothing and footwear (-2.34% Y/Y vs 0.73% prior) and  furniture and household equipment (-3.01% Y/Y vs 1.41% prior) both decelerated.
• Services accelerations came from restaurants and accommodation (2.8% Y/Y vs 1.96% prior) and insurance and financial services (2.80% Y/Y vs 1.96% prior). Package holidays ticked up a little, but will have been offset by a larger decline in airfares.
• We estimate seasonally adjusted CPIF ex-energy inflation at 0.17% M/M, a pullback from 0.64% in May. It keeps 3m/3m momentum comfortably negative at -1.54% (vs -1.66% prior), though there will likely be some base effect next month when April’s -0.81% M/M reading falls into the denominator. Seasonally adjusted services is estimated at 0.67% M/M, with goods (ex-food) estimated at 0.37% M/M.
• Inflation breadth metrics were broadly steady. The proportion of CPIF subcomponents with annual inflation rates between 1-3% Y/Y ticked up to 16% (vs 14% prior). The proportion with sub-1% rates was 62% (vs 63% prior), and the proportion with greater-than 3% rates was unchanged at 23%.