GILTS: Marginally Lower On Spillover From EGBs

Bund futures have moved away from multi-week lows this morning, currently +37 ticks at 127.66. Recoveries are still considered corrective for now, with initial resistance not seen till 128.08  (Dec 8 high). Volumes have been very healthy, seemingly reflecting a mix of views around whether the recent selloff can extend, or if a relief rally is more likely.

• 10-year Bund yields are down 2bps to 2.84%, after briefly reaching 2.88% this morning. The 2.90% figure presents the initial topside target, shielding the March 12 high of 2.94%.
• The German 10s30s curve is ~0.5bps steeper at ~60bps, after flattening around 5bps yesterday. The EUR 10s30s swaps curve is little changed at ~29bps. Given recent hawkish repricing in EUR rates has been primarily driven by the front-end, flattening further out the curve may represent unwinds of popular steepener positions related to the Dutch pension fund transition.
• 10-year EGB spreads to Bunds are up to 1bp wider on the session, with BTP/Bund spread back above 70bps. However, widening in the BTP/Bund spread has still been fairly contained considering the sharp uptick in EUR rates vol.
• In France, focus remains on this afternoon's National Assembly vote on the 2026 Social Security budget. The outcome remains very close to call.
• Ireland plans to issue E10-14bln of bonds with one syndication in 2026. This is a bit higher than expected, but there has so far been limited reaction in Irish bond markets.
• Today’s regional data calendar has been light, with some focus on US job openings data this afternoon ahead of tomorrow’s Fed decision. 

• USDJPY extended overnight gains through the European open, briefly printing 156.43, but stalling ahead of 156.58 resistance, the November 28 high. While interest rate correlations have been weaker in recent months, this week's corrective strength has been underpinned by hawkish repricing across core FI markets. A subsequent 30 pip fade off highs coincided with a downtick in the US 10y yield, followed by a Ueda interview which does little to dispel BOJ hiking expectations for December.
• AUD outperforms in the aftermath of the RBA, with the latest downtick for the DXY propelling AUDUSD back towards session highs. 0.6650 has continued to hold across the last three sessions, and a break above would likely prompt some momentum demand. Alongside the RBA’s expected hold at 3.6%, the board sees the balance of risks tilted toward a potential rate hike in 2026 to contain inflation, with cuts firmly off the table, according to Governor Bullock. 0.6707 remains the key AUDUSD resistance, the Sep 17 high.
• It is worth highlighting that NZDUSD has traded all the way back to its medium-term pivot at 0.5800, potentially providing an opportunity to re-establish longs in AUDNZD, which has been in a very strong uptrend across the second half of 2025. The cross has remained well supported by the 50-day EMA, intersecting around the 1.14 mark.
• Ahead of the AUD, the Swedish Krona tops the G10 leaderboard amid the stable risk backdrop Tuesday. Recent domestic data has suggested an economic recovery is taking hold in Sweden, helping EURSEK narrow the gap to support at 10.8815.
• BOE Deputy Governors Lombardelli and Ramsden, and external rate-setters Mann and Dhingra speak at Parliament's Treasury Committee later today. The data calendar sees the US weekly ADP release, NFIB small business index, weekly redbook retail sales, and JOLTS job openings ahead of tomorrow's FOMC.

TYG6 112/111 put spread vs. 114 calls paper paid 0-06 on 10K for the put spread.