EGBS: Underperform Core Peers, Supply From Spain, France and Ireland Due Today

A pullback in European equity futures has provided light support to core EGBs, though an uptick in Brent crude oil prices and impending Spanish and French supply has capped topside intraday. Broader EGB underperformance versus Gilts and Tsys can be attributed to continued focus on the sea change in European fiscal policy, the Fed-driven nature of the bid in bonds and Gilt's higher beta to Tsys. 

• The dovish reaction to yesterday’s FOMC decision and press conference still leaves Bund futures +31 ticks versus yesterday’s settlement levels at 128.42.
• A bearish technical theme remains intact, but the gap has narrowed to initial resistance at 128.94, the 20-day EMA.
• German yields are 1.5-3.5bps lower, with the belly of the curve outperforming. German ASWs vs. 3-month Euribor are little changed across the curve.
• Sovereign supply is due from Spain, France and Ireland this morning.
• 10-year EGB spreads to Bunds are biased wider as a result of the equity weakness.