EU CREDIT UPDATE: Hutchison (CKHH; A2/A/A-*+) Ports Sale

• Bund futures have traded in a tight 34 tick range, currently -23 ticks at 130.62. Geopolitical tensions between Israel and Iran continue to dominate headline flow, with fixed income markets having to weigh up fresh inflation risks alongside weaker risk sentiment. Today’s subdued price action is somewhat suggestive of headline fatigue, until the next material development in the conflict arises.
• The recent pullback in Bunds is still considered corrective for now, with key short-term support seen at 130.12, the Jun 5 low.
• Meanwhile, US President Trump has provided renewed hawkish rhetoric with respect to a trade deal with the EU.
• German yields are 1-2bps higher, with the short-end underperforming. There was limited impact from the stronger-than-expected German June ZEW survey (expectations component 47.5 vs 35.0 cons, 25.2 prior).
• The EU is tapping the 3.375% Oct-39 EU-bond via syndication today, with a E5bln WNG transaction. The size came in at the bottom of MNI’s expected range. German also sold Green Bunds this morning, with solid results.
• 10-year EGB spreads to Bunds are biased wider, with equity risk sentiment dented by a re-escalation of the conflict in the Middle East.
• ECB’s Stournaras re-iterated previous comments, noting that we have “reached an equilibrium based on developments in inflation”. 

Few Block trades Buyers in OAT in the past 15 minutes.

• OATU5  7.92k at 123.88.
• OATU5  2.38k at 123.97.
• OATU5   960 at 123.96.

Gilts hold lower given  cues from global peers and with crude oil off yesterday’s lows, although solid demand at the latest 5-Year auction has provided some support in recent trade.

• Futures stick within yesterday’s range, trading as low as 92.37 before recovering to ~92.50.
• Bullish technical conditions remain intact in the contract, initial support and resistance located at yesterday’s low (92.23) & the 50.0% retracement of the Jun 13-16 down leg (92.95), respectively.
• Yields 1-3bp higher, curve steeper.
• 2s10s and 5s30s stick within multi-week ranges, stabilising back above 60bp and 120bp, respectively.
• BoE-dated OIS is little changed on the day, showing ~48bp of cuts through year-end, with the next 25bp step almost fully discounted through the end of the September MPC (~24.5bp of easing showing through that horizon).
• SONIA futures flat to -3.0.
• Expect global cues to dominate for the remainder of the day, with ongoing focus on the next stages of the Israel-Iran conflict.
• Locally, CPI data will cross on Wednesday, ahead of the BoE’s Thursday decision.
• We see downside risks to the headline and services CPI reading (our full preview is available here).
• Still, the data shouldn’t have too much impact on the BoE decision, with no change expected by both the sell-side and markets, but a low print could impact the vote split.