EUROPEAN FIXED INCOME UPDATE: bonds deflated after early blowout

Analysis details (10:39)

The downturn in BTPs and Bonos may well be supply-related, but core debt has also suffered a hefty fall from grace that could be attributed to pure position paring (long liquidation) for the main event. However, the scale and manner of the reversal hints at a technical retracement from arguably overextended and overbought levels in view of the high risk/reward assigned to the upcoming US inflation data. On that note, the elevated stakes are abundantly evident in FX circles where break-evens for straddles in many Usd/pairings have spiked sharply, and it appears that bond bulls are taking that on board in a buyer beware fashion. Looking at price action/levels in more detail, Bunds are back below par within a 138.45-137.63 band vs Wednesday’s 137.64 Eurex close, Gilts sub-104.00 between 104.14-103.64 parameters vs yesterday’s 103.68 Liffe settlement and the T-note is flat having peaked at 114-22 and troughed at 114-11. Also to come, jobless claims and a trio of Fed speakers. 

12 Jan 2023 - 10:39- Fixed IncomeResearch Sheet- Source: Newsquawk