Fixed Income: Early Trade Sees Bunds Rise
Bund futures are slightly higher in early trade, recovering ground after yesterday’s correction, which ultimately lacked conviction and left the uptrend intact. With weakening growth and yesterday’s downward revision to July HICP inflation markets are starting to look for rate cuts. However, ECB officials were quick to stress that slowing growth doesn’t necessarily mean a quick drop in inflation and that there are still inflation pressures, which supports our view that the ECB will not be cutting rates any time soon. As of 6:29GMT the September 10-year Bund future is up 10 ticks at 114.05. The 10-year cash yield is down 1 bp at 4.19%, while the 2-year yield is unchanged at 4.02%. In the money markets the Sep 3-months Euribor future is down 0.010 at 95.010 while back months futures are mixed.