BONDS: EGBs-GILTS CASH CLOSE: Bunds Outperform Gilts, GGBs Lag
Mar-12 17:53
Long-end core EGBs outperformed UK counterparts Wednesday, while Greek instruments underperformed peers.
- Global core FI rallied briefly after US CPI came in below-expectations, but the move quickly reversed as the details proved less benign - and Bund and Gilt yields would subsequently hit session highs.
- But they strengthened over the early afternoon as equities pulled back from a nascent rally earlier in the session, with continued concerns over US tariffs/growth weighing.
- Gilts lagged the afternoon rally, leading to underperformance vs Bunds. Both the UK and German curves flattened, with the latter twist flattening.
- Periphery EGBs were mixed, with GGB spreads widening after a surprise Greek dual-tranche syndication announcement.
- In data, the ECB's forward-looking wage tracker saw a small uptick for Q4 2025 negotiated wages (ex one-off payments).
- Thursday's European schedule includes Eurozone industrial production and Italian labour market data, while we hear from several ECB speakers including Rehn, Holzmann, Villeroy and Nagel.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 2.6bps at 2.225%, 5-Yr is up 0.3bps at 2.522%, 10-Yr is down 2bps at 2.877%, and 30-Yr is down 2.1bps at 3.166%.
- UK: The 2-Yr yield is up 5.2bps at 4.225%, 5-Yr is up 4.9bps at 4.338%, 10-Yr is up 4.8bps at 4.722%, and 30-Yr is up 4.3bps at 5.326%.
- Italian BTP spread down 0.1bps at 111.6bps Greek up 1.5bps at 81.9bps
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OPTIONS: Call Condor Buying In Decent Size Monday
Feb-10 17:52
Monday's Europe rates/bond options flow included:
- OEH5 117.25/118.25 RR, bought the call for 4.5 in 4k.
- RK5/ERM5 98.0625/98.3125cs spread, bought for 0.25 in 4k.
- ERK5/ERM5 98.0625c calendar, bought for 0.75 in 10k.
- ERK5 97.875/97.9375/98.00/98.0625c condor, bought for 1.5 in 4k
- ERM5 97.875/97.9375/98.00/98.0625c condor, bought for 1.5 in 2.5k.
- ERM5 97.9375/98.00/98.0625c fly vs 97.50p, bought the fly for flat in 10k.
- SFIM5 95.95/96.05/96.15/96.25c condor, bought for 2.5 and 2.75 in 28k total.
US TSY OPTIONS: April'25 10Y Vol Sale
Feb-10 17:51
- -6,000 TYJ5 108/111 strangles, 39, appr implied vol 5.94%
FOREX: USD Index Holds Moderate Advance, JPY Remains Volatile
Feb-10 17:43
- The USD index is holding onto 0.2% gains on Monday, as the initial reaction to a Trump announcement of tariffs on steel and aluminium bolstered the greenback. Aside from the Japanese yen, G10 currency ranges have remained subdued as markets await the key US CPI data due on Wednesday.
- The Japanese Yen traded in a relatively volatile manner and remains weaker on Monday. USDJPY briefly extended its recovery from Friday’s lows to around 150 pips, printing a 152.54 session high during the European session. Overall, this recovery for Cross/JPY appeared to be very much a correction to the broader developing theme we saw last week, and across the US session these moves did reverse.
- USDJPY backtracked across US hours alongside a broader bid in core FI on light volumes. As such, the pair trades around 151.75 as we approach the APAC crossover. Renewed weakness would keep the focus on 150.93, the Feb 07 low, a break of which would open up 149.69, the Dec 9 low. In similar vein, EURJPY resides around 90 pips off the session highs of 157.42.
- EURUSD printed a 1.0280 low overnight and moving average studies remain in a bear-mode position, highlighting a dominant downtrend. 1.0272, the Feb 04 low is the immediate support level of note.
- In emerging markets, USDMXN is on the front foot as tariff concerns continue to linger. The pair is 0.53% higher at 20.67, with the pair edging closer to the mid-week highs from last week around 20.71.
- Speeches from BOE’s Mann and Governor Bailey will headline the Tuesday calendar, before Fed Chair Powell is due to deliver testimony on the Semiannual Monetary Policy Report to Congress.
