EUROPEAN FIXED INCOME UPDATE: choppy and divergent after Monday’s dump

Analysis details (11:31)

Bonds have been very volatile in the aftermath of yesterday’s largely one-sided affair when Fed hike hype and inflation fears reached extreme levels. However, Eurozone debt is back under pressure after mixed auction results and another hawkish blast from ECB’s Knot who is in the more than 25 bp rate hike camp if conditions remain the same as today at the end of Q3. Indeed, Bunds are back around the 145.00 axis after a minor upside extension to 145.58 and 2 year futures are still underperforming following the Schatz tap that was covered 1.6 times at an average yield significantly higher than when issued. Conversely, Gilts and US Treasuries are holding firmly above par in advance of PPI data, while Italian BTPs will be hoping for something more concrete from ECB’s Schnabel on fragmentation as the spread to Bunds breaches 250 bp. 

14 Jun 2022 - 11:31- Fixed IncomeResearch Sheet- Source: Newsquawk