Fixed Income: core debt recoils, as BTPs bounce and German CPI climbs

Bunds have pared losses and retreated to a fresh Eurex intraday low of 158.28 (+24 ticks vs +75 ticks at best) in wake of German state inflation data suggesting a circa 0.2% point upward bias to the national y/y consensus, and a partial reprieve for Italian bonds ahead of more budget meetings before the Cabinet convene that has been delayed, but still scheduled to take place today. Moreover, BTPs have gleaned some comfort or at least sighed relief in the knowledge that nervous investors did not shun the latest cash offering, but the 10 year benchmark remains below 126.00. Elsewhere, Gilts continue to track Bunds within tighter confines and recently slipped back below 121.00, to 120.93 (+14 ticks vs +51 ticks at one stage), while US Treasuries are consolidating and unwinding a degree of bull-flattening after the Fed and in front of a pretty packed penultimate session before the end of September (from the trading standpoint). Aside from a raft of data and more from Powell, plus Kaplan, the 7 year auction could be interesting given mixed impulses via softer yields/less concession vs more clarity regarding the FOMC outlook.

(RANsquawk)