BUNDS: Looking to close the Opening gap

MNI’s inflation breadth tracker (see chart below) shows disinflation overall continuing to stall in April, with the percentage of ECOICOP (European classification of individual consumption according to purpose, a standardized category split) items printing at or below 1% unchanged 42.8%. In the high-inflation categories, similar trends could be observed, with the percentage of categories above 5% falling just 0.3pp to 14.8% in April.

German final April HICP was unrevised from the flash readings at 2.2% Y/Y (2.3% prior) and 0.5% M/M (0.4% prior). The final reading to CPI was also unrevised at 2.1% Y/Y (2.2% prior) and 0.4% M/M (0.3% prior). Core CPI accelerated 0.3pp to 2.9% Y/Y, a rate not seen since January.

• Overall, the data confirms the main conclusions from the flash / state-level reading - services accelerated materially (contribution +0.20pp vs prior) on the back of the Easter effect while goods inflation slowed (contribution -0.25pp vs prior) following lower energy prices.
• Without (volatile) airfares adding 0.16pp and package holidays adding 0.08pp to headline vs March, services inflation's contribution to headline would have been lower than the month before.
• This speaks in favour of the process of underlying services disinflation being intact.

German ASWs vs. 3-month Euribor are little changed on the day, recovering from session lows alongside outright bonds as equities move away from session highs.

• The recent move lower in ASWs has stalled a little over the past 36 hours, after the narrowing impulse from the moderation in Sino-U.S. tariffs moderated.
• ASWs trade closer to their cycle closing lows than their April highs, given the recovery in risk appetite/row back of U.S. tariffs.
• Medium-term, supply considerations are set to present ongoing pressure for long end spreads, but any further sell offs in spreads are unlikely to be linear, given the macro volatility evident at present.