Bund yields: Short-covering seen shallow – Societe Generale
Societe Generale’s Kenneth Broux observes Bunds and Bonos retracing from recent yield highs despite a strong upside surprise in Spain’s CPI. The bank warns that if this inflation pattern is replicated across the Euro area, risks are skewed to an upside surprise in core HICP. Bund short-covering and yield dips are seen as potentially shallow, with topside levels at 3.70%/3.74% and support at 3.54%.
Societe Generale's Kenneth Broux notes that Bunds and Bonos are reverting from recent yield peaks, even with a robust upside surprise in Spain's CPI. The bank alerts that should this inflation pattern spread across the Eurozone, risks shift to an upside surprise in core HICP. Short-covering and yield declines in Bunds might be limited, with resistance at 3.70%/3.74% and support at 3.54%.
Economist Sam Cartwright suggests that if this trend spreads throughout the Eurozone, it would create a risk favoring an upside HICP surprise tomorrow (no change from SG's forecast at 2.4% yoy).
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