TURKEY: CBRT Response Provides Further Squeeze on Liquidity

• US TSY 13W AUCTION: NON-COMP BIDS $2.083 BLN FROM $80.000 BLN TOTAL

• US TSY 26W AUCTION: NON-COMP BIDS $2.128 BLN FROM $70.000 BLN TOTAL

The 10-year Gilt/Bund spread has fully unwound yesterday’s tightening, with this morning’s UK labour market data helping to limit downside in Gilt yields through the session. The spread is 2bps wider today 205.5bps.

• This morning’s labour market data sent stronger-than-expected signals from the quantity side of the labour market, while pay growth was only a touch softer than expected.
• Tomorrow’s UK calendar is headlined by the January inflation report. MNI’s preview is here.
• 10-year Bund yields are back below 2.50%, now little changed on the day. German ASWs (vs 3m. Euribor) are also within 1bp of yesterday’s closing levels.
• Comments from ECB’s Cipollone on balance sheet normalisation at today’s MNI webcast had little tangible impact on spreads. Overall, he believes the move away from scarce collateral conditions is not yet having a major impact on Eurozone money markets.
• Speaking on the future composition of the ECB’s structural bond portfolio and refinancing operations, Cipollone’s personal preference is for the ECB to provide banks with sufficient liquidity to face unforeseen volatility, but also reserves they can count on to extend credit to the economy.