US NATGAS: Western Canada Natgas Fundamentals

OATs underperformed for a 3rd consecutive session as French political concerns lingered.

• Core EGBs and Gilts gained in morning trade, the latter after registering fresh cycle lows at the open, amid a bit of risk-off with equities sagging.
• Impactful data was limited, but regional politics were a key focus, with France's Sep 8 no-confidence vote continuing to weigh on OATs (the Dutch government survived a no-confidence motion of its own today, though this was expected).
• Outright OAT yields hit recent highs with 30Y seeing yields hit a 14-year high, as spreads to Bunds continued to widen.
• Trade turned more constructive going into the close, with OATs seemingly finding a footing, boosting Bunds and Gilts (as well as Treasuries).
• The belly outperformed on the German curve (despite a soft 7Y auction), with yields down throughout, while the UK curve saw yields drop more or less in parallel.
• Thursday's data schedule includes consumer and business confidence for Italy and the Eurozone, along with an appearance by the ECB's Rehn and the account of the July ECB meeting.
• The week's regional focus - the Eurozone August flash inflation round - technically starts Thursday (Belgium is due) but most attention will be on Friday's releases for Spain, France, Italy, and Germany. MNI's preview is here.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is down 2.3bps at 1.915%, 5-Yr is down 3.1bps at 2.237%, 10-Yr is down 2.3bps at 2.7%, and 30-Yr is down 1.3bps at 3.307%.
• UK: The 2-Yr yield is down 0.4bps at 3.964%, 5-Yr is down 0.6bps at 4.133%, 10-Yr is down 0.4bps at 4.736%, and 30-Yr is down 0.8bps at 5.6%.
• Italian BTP spread up 4bps at 87.3bps / French OAT up 5.1bps at 82.4bps  

Full report here: LINK

Clear Downside Surprise Needed For Dovish Tilt

• The August Eurozone inflation round is split across two weeks, with the main prints of Spain, France, Italy, and Germany all scheduled for this Friday before the Netherlands and the Eurozone-wide figures follow next Tuesday.
• Analysts are looking for headline to pick up marginally to 2.1% Y/Y, while core inflation is expected to slow to 2.2%.
• Across categories, the main driver this time will be energy inflation base effects, putting upside pressure on headline. Analysts see the category around -1.6% Y/Y in August after -2.4% in July.
• Services inflation is expected to continue its downtrend seen this year, with consensus standing around 3.0-3.1% after 3.2% in July.
• Core goods meanwhile are seen to give away some of their July firmness, at 0.7% Y/Y, while views on food/alcohol/tobacco inflation are more mixed this time where consensus might be for a roughly unchanged print at 3.2%.

• Treasury futures are back to extending highs despite selling after 5Y auction tail, curves twist steeper with bonds underperforming.
• The Dec'25 10Y contract currently trades 112-14.5 (+7) -- just below resistance at 112-15+, the Aug 5 high and the bull trigger. Clearance of this hurdle would resume the uptrend and pave the way for a climb towards 112-19 initially, a Fibonacci projection.
• Curves: 2s10s +3.882 at 61.931 (63.530 high), 5s30s +3.641 at 121.078.
• Cross asset roundup: US$ back near yesterday's lows, Bbg $ index BBDXY -0.92 at 1204.52 after climbing to 1210.30 earlier, Gold firmer (+1.20at 3394.77), crude gaining (WTI +0.72 at 63.97).