BONDS: EGBs-GILTS CASH CLOSE: Yields End Week/Month/Quarter Higher
Jun-30 16:21
Bunds outperformed Gilts Friday, with periphery EGBs trading mixed, and core FI yields ending the week (and month and quarter) higher overall.
- Yields rose early in the session with no specific catalysts evident, though the week's generally hawkish central bank rhetoric continued to weigh ahead of month-end dynamics.
- There was basically no reaction to the Eurozone's June flash inflation print which was well priced on prior national inflation readings (including a softer-than-expected France number).
- However, with core and services inflation remaining sticky, the ECB remains on course to hike at the next two meetings (our review is here). And as MNI reported citing Eurosystem sources, the Governing Council must see the slew of data through early September before deciding its move at that juncture.
- Yields descended in the afternoon though after US PCE inflation and MNI Chicago PMI came in on the soft side of expectations.
- The German curve ended bull flatter, with the UK's bear flattening.
- Next week begins fairly quietly (with a US holiday on Tuesday and early market close Monday), with the US employment report Friday the focus.
Closing Yields / 10-Yr Periphery EGB Spreads To Germany
- Germany: The 2-Yr yield is unchanged at 3.196%, 5-Yr is down 1.8bps at 2.55%, 10-Yr is down 2.4bps at 2.392%, and 30-Yr is down 3.8bps at 2.389%.
- UK: The 2-Yr yield is up 4.6bps at 5.274%, 5-Yr is up 3.9bps at 4.663%, 10-Yr is up 0.6bps at 4.388%, and 30-Yr is down 1bps at 4.423%.
- Italian BTP spread down 0.3bps at 168bps / Greek up 1.3bps at 127.9bps
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OPTIONS: Larger FX Option Pipeline
May-31 16:19
- EUR/USD: Jun02 $1.0690-05(E1.1bln); Jun06 $1.0750(E1.8bln)
- USD/JPY: Jun02 Y135.00-10($1.4bln); Jun05 Y138.20($1.4bln); Jun06 Y140.00($1.2bln)
- USD/CAD: Jun02 C$1.3600-15($1.4bln)
BONDS: EGBs-GILTS CASH CLOSE: Soft EZ Inflation Sparks Rally
May-31 16:04
European curves leaned bull steeper Wednesday, with central bank hike prospects dented and curve short ends/bellies boosted by softer than expected inflation data.
- The initial dovish signal sent by German state-level (NRW) May CPI carried on through a soft French May flash inflation reading, boosting EGBs. A strong Italian print dented Bunds only briefly before they pushed to fresh session highs.
- The afternoon saw some consolidation, with the national German print in line with updated estimates, and strong US jobs opening data offsetting a very weak MNI Chicago PMI.
- Bull flattening turned to bull steepening by session's end. Gilts outperformed Bunds, with BoE hike pricing pulling back sharply vs the huge rises in the past few sessions (peak -13bp on the day; ECB -3bp). Periphery spreads traded mixed.
- Central bank speakers (including ECB's Villeroy/de Guindos, and BoE's Mann) had little impact, being overshadowed by the inflation data.
- Thursday sees the eurozone May prelim inflation print, with final PMIs also eyed.
Closing Yields / 10-Yr Periphery EGB Spreads To Germany:
- Germany: The 2-Yr yield is down 6.5bps at 2.719%, 5-Yr is down 7.8bps at 2.278%, 10-Yr is down 6bps at 2.282%, and 30-Yr is down 3.8bps at 2.461%.
- UK: The 2-Yr yield is down 10bps at 4.335%, 5-Yr is down 11bps at 4.101%, 10-Yr is down 6.4bps at 4.183%, and 30-Yr is down 6.9bps at 4.515%.
- Italian BTP spread down 1bps at 179.9bps / Greek up 3.7bps at 149.5bps
CANADA: Desjardins Switch View From Rates On Hold
May-31 15:51
- With the u/e rate hovering near-record lows for five months, economic growth outperforming expectations and three-month annualized rates of core inflation stuck between 4% and 5%, Desjardins no longer think keeping rates at 4.5% will be enough to rein in excess inflationary pressures.
- Partly based on lingering uncertainty on liquidity conditions evolving as the US govt replenishes the TGA, they're “leaning towards a rate hike in July assuming liquidity conditions don’t deteriorate too much”, although “certainly can’t rule out a move next week given the dataflow”.
- “Furthermore, after coming off of the sidelines in either June or July, the door would be wide open to a subsequent increase”.
