GERMAN AUCTION RESULTS: Disappointing (but not disastrous) 10-year Bund auction

FVN6C 107.00 calls paper paid 0-10+ on 20K.

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Gilts bear flatten with oil rallying as Iran & Israel exchange missile fire.

• Futures breach initial support at the June 3 low (87.43), with lows of 87.28 registered.
• The break below initial support exposes the May 21 low (86.70). Meanwhile, initial resistance is located at the June 2 high (88.65).
• Zooming out, a short-term bullish theme within a longer run bearish cycle remains intact above the bear trigger (84.98).
• Yields 4-6bp higher, curve flatter.
• 10s haven’t been able to retest 5.00% following last week’s rebound from the 4.80% area. Last 4.95%.
• First BoE hike still fully discounted come the end of the September MPC.  51bp priced through year-end, with ~64bp of tightening priced through April. Liquid BoE-dated OIS contracts 1-8bp more hawkish on the day.
• BoE dove Taylor reaffirmed his well-defined stance this morning, noting that “I think interest rates don't need to go higher because they're quite restrictive at the moment. I feel comfortable where we are unless we get the worst-case scenario, but I really want to get that sense of reassurance that this is moving behind us right now”.
• UK GDP data (Friday) headlines this week’s limited domestic calendar.
• As a result, expect ongoing focus on cross-market matters and the geopolitical backdrop for much of the week.
• On the supply front, we remain on the lookout for the syndicated tap of the 5.25% Jan-41 gilt. We look for this deal to be priced tomorrow/Wednesday, with a GBP6-8bln transaction size.