EUROPEAN FIXED UPDATE: Sonia strip supported on Ramsden but reverts to ‘hawkish’ bias amid broader fixed pressure

Analysis details (10:50)

Initial leads from APAC trade were fairly contained/marginally firmer for USTs/Bunds; however, pronounced pressure was seen and coincided with commentary from BoE’s Ramsden. Remarks which, while at first glance could be interpreted as hawkish/in-fitting had a decidedly dovish spin to them. Explicitly, Ramsden noted that while it is more likely than not that the BoE will hike further he, crucially, does not rule out a need to begin lowering the rate quickly at some point – albeit, not forecasting this. Amidst this pressure of circa. 30 ticks was seen in Bunds, though this was accompanied by a clear dovish move in GBP and similar Sonia/Gilt action on their respective opens. Subsequently, the upside in Gilts was sufficient to pull Bunds above 157.00 and USTs to 119.31. However, this bounce was relatively short-lived and has given way to renewed pressure across core counterparts with Bunds, USTs and Gilts at/near lows of 156.18, 119.19 and 117.27 respectively. Action which provided an incremental pause to the well-entrenched flattening narrative, with the US yield curve steeper (2s20s by circa. 2bps) though still substantially inverted. Moving to the periphery, BTPs are in-fitting with the broader action and the IT-GE spread remains just above the 210bp following weekend rating action as participants await developments to the political narrative after a blow to the Centre-left coalition yesterday but, interestingly, amid an incremental waning in poll performance for the Centre-right. With such a coalition now, depending on the provider, not expected to draw an outright majority via a Brothers, Lega and Forza coalition. Finally, the session ahead is devoid of catalysts with the exception of supply via the US; for reference the morning’s UK and German outings passed without fanfare, prompting fleeting Gilt upside and limited Bund follow through respectively.

09 Aug 2022 - 10:50- Research Sheet- Source: Newsquawk