German bunds hover around 0.15% as markets await U.S employment report

The German 10-year yield rose 1 bps on Friday kept hovering around 0.15% mark as markets await U.S. employment report on Friday.

Meanwhile, healthy figures for payrolls and earnings should then keep the 10-year US Treasury yield in a 1.80-2.00% range and prompt renewed 10-year T-note/Bund yield spread widening. 

In the Eurozone, the preliminary March CPI inflation rate rose by 0.1ppt to -0.1% y/y, in line with consensus, along with the broad core rate at 0.9% y/y, which is still low enough to keep the ECB dovish. 

In terms of intra-Europe spreads, the 10-year Italian/German one has been hovering at 105-108bps lately, and our bias remains for it to come back in to the 100bps mark. The UK/German yield spread meanwhile lacks direction between 125 and 130bps. 

While our bias is on the side of widening, the ECB is not buying Gilts uncertainty about the UK/EU referendum is evidently favouring Gilts for the safe-haven role.