Bund/T-note spread widening remains intact
Bund/T-note spread widening remains intact heading into the FOMC decision near -207 bp, though inside earlier wides near -209 bp following the cooler than expected U.S. core CPI reading for November. That compares to the -200 bp area at the time of the last meeting and the -172 bp narrows set in early September. Attention will quickly shift to the ECB meeting tomorrow, however, with any on-the-fact demand for Treasuries and caution ahead of the ECB could be good for a spread pullback to the -200 bp area. Indeed, there seems some aversion to a retest below 0.25% in Bunds ever since the ECB taper announcement and the T-note has found the 2.50% area a challenge despite Fed hikes and the firming global economy, placing a tough implied resistance near -225 bp for now. Accordingly, a break of either -200 bp or -225 bp could set the tone for the next leg.