The first trading day after the long Easter weekend saw a lot of volatility in EGB markets, helped by the call for snap elections in the UK. Interestingly, despite the risk-off mood in equities and widening in iTraxx credit indices, peripheral EGB spreads managed to tighten. What is more, the 10yr OAT/Bund spread eventually closed little changed at 73p, although 5yr spread widened by 2bp. Thanks to the afternoon rally in US Treasuries, the 10yr Bund yield closed 3bp lower at 0.15%, hitting the low end of the year-to-date range. With four French presidential candidates clustered around 20% in the polls for the first round on Sunday and the backdrop of heightened geopolitical uncertainty, we expect core bond yields to hold at current depressed levels in coming days.

ECB QE data. In the first full week of buying subject to the new monthly target of €60bn total APP purchases amounted to €15bn, which suggests a moderate frontloading ahead of the Easter weekend. The PSSP accounted for €12.5bn, or 83% of the total. This share is within previous ranges, if not slightly lower, with the average since July 2016 at 85%.

EGB supply. Today Germany will re-open the off-the-run DBR 2.5 7/44 line for €1bn. The bond is trading exceptionally rich on ASW by historical standards (i.e. -38bp). However, it is also trading rich in repo (i.e. -0.85% s/n yesterday), suggesting a short base among dealers, and looks cheap on the curve, with the DBR 42/44/46 micro-fly at its highest level on record. This should ensure that the auction won’t fail. For comparison: the previous tap in February saw a real bid/cover of just 0.7 and a retention rate of 41.7% Elsewhere, KfW is expected to launch a new 5yr EUR benchmark today. Interpolating between the KFW 0 6/21 and 7/22 lines would pitch fair value on the secondary curve in the MS -39/-38bp area. Belgium yesterday announced that the bonds that will be tapped on April 24 are going to be the OLO 10/23 and 6/27 lines.