JGBS: Goldman Expect Further Underperformance Vs. Peers

SFIU5 95.85/96.00cs vs 95.50/95.35ps, bought the cs for 1.5 in 9k total.

Major EGB futures have risen alongside Gilts following the lower-than-expected UK CPI reading this morning, with Bund futures +14 ticks at 130.61 at typing, just off session highs of 130.74.

• German cash yields are 0.5-3bps lower, with the belly outperforming. The 10-year Gilt/Bund spread has tightened almost 6bps on the session following the UK data.
• 10-year EGB spreads to Bunds have tightened, with BTPs outperforming. After reaching a high of 124bps on Monday, the BTP/Bund spread is now back at ~116.5bps.
• Today's 30-year Bund auction saw average results, while the EFSF has sent an RFP for an upcoming transaction, in line with MNI’s expectations. We expect the transaction to take place on Monday or Tuesday next week.
• Eurozone industrial production was in line with consensus expectations and MNI’s tracking at 0.2% M/M (vs an upwardly revised 0.2% prior).
• ECB speakers (Lane overnight, de Guindos and Villeroy this morning) have re-iterated the base case of further policy easing, but were not market movers.
• Global focus remains squarely on this afternoon’s US CPI report (1330GMT).