EUR Swaps: Core CPI relief; Buyers finally surface; Bullish seasonals eyed

Chart red green numbers 13 Jun 2022
Euro core CPI printed slightly lower than consensus, but still up from the previous month. A few buyers surface for month-end.

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  • Core CPI relief; Buyers finally surface
  • Will bullish summer seasonals work? - Barclays
  • New issues

    Core CPI relief; Buyers finally surface
    Euro core CPI printed at 5.4%yoy, slightly lower than the Bloomberg survey consensus at 5.5%, but still an increase from 5.3% the previous month. “There’s probably some relief on the ECB that it wasn’t worse,” a trader felt.

    Euro fixed income pared earlier losses having hit a low of 133.09 (-0.55) before the data and has since rallied to be last trading near unchanged around 133.64 while the 10y yield was marked at 2.41% (unch).


    “It’s still thin out there and any flows that do go through will likely come from month-end,” said one euro trader, “The usual buyers were absent this week, so maybe we’ll see a bit more support coming in today.”

    The front-end is little changed with white Euribors +0.5bp to +1bp higher while reds are down by -0.5bp to -0.1bp.

    Across the curve, 2s/10s steepened earlier in the session but has since pulled back and was last around -85bps (unch), while further out 10s/30s initially flattened but has since come back and was last at -46.75bps (unch).

    Elsewhere, Bund asset swap spreads are a touch wider amid reports of opportunistic fast money selling. Last prices vs 6mE were Schatz at 73.2bps (+0.5bp), Bobl at 71.4bps (+0.4bp), Bund at 66.6bps (unch) and Buxl at 31.6bps (+0.4bp).


    Will bullish summer seasonals work? - Barclays
    In its latest rates weekly Barclays discusses whether seasonal bullishness in Bunds will prevail over the summer period. The bank writes:

    • “Will bund-bullish summer seasonals work? The positive summer seasonality for bunds is well-documented. Averaging across different time horizons, the average rally in bunds ranges from 10-20bps in July and is consistently larger than that of USTs or gilts. How strongly will this pattern play out this year is difficult to say given there isn’t any fundamental factor that can explain why the seasonal pattern exists.

    • “Yet, we can offer the following considerations: i) the ECB’s terminal rate pricing of ~4% is unlikely to be challenged in the near-term as we just heard from a plethora of ECB speakers who kept their options open for September; ii) June flash headline and core HICP realising in line with consensus expectations even if core shows a pick-up versus May should also be reflected in the price now; iii) activity reports (flash PMIs) for June painted a weak picture and keeping in mind the ECB’s robust growth projections, the bar to surprising on the downside is low.

    • “All these factors combined should facilitate a constructive backdrop for bunds. However, as always, there are risks. Even if the domestic picture would argue for lower bund yields, foreign factors, including, stronger US and UK data on jobs and inflation as well as fears around a change in BoJ’s YCC policy at the July meeting could prove to be a headwind.”


    New issues

  • BayernLB plans to sell €500m (max) long 3y Covered through BayernLB, Erste, ING, Natixis and UniCredit.