Fixed Income: grinding bid in core bonds, but stampede back into BTPs

A relatively measured advance in Bunds, Gilts and US Treasuries vs the pace of rebound in Italian debt as Finance Minister Tria tries to walk the tightrope between keeping the coalition content and EU fiscal controllers happy at the same time. 10 year BTP futures are off best levels, but back over 127.00 vs 126.19 in early trade, while there German counterparts are back below 158.00 and re-testing Eurex session lows after a satisfactory rather than sound 5 year Bobl auction. Gilts have also eased back from Liffe peaks of 120.75 (+29 ticks) alongside USTs, albeit with curves still moderately flatter and talk doing the rounds about some asset-switching in favour of bonds over stocks for Friday (or rather the turn of the month, Q3 and fy H1 for Japan). More immediately, a better than expected CBI trades balance before the CNB, US data, ECB’s Draghi, the FOMC and RBNZ.