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BONDS: EGBs-GILTS CASH CLOSE: BTPs Shine Amid Broader Rally

BONDS
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European yields fell sharply Tuesday, as oil prices and equities pulled back.

  • Early gains came largely after an overnight drop in crude oil on Israel-Iran de-escalation.
  • UK labour market data didn't suggest any firm conclusions for BoE policy (regular pay moderated while the quantity side of the data held up), while  the German ZEW investor survey beat on expectations, but missed on current situation.
  • Multiple negative earnings headlines across tech (ASML) and European luxury (LVMH) weighed heavily on European equities in the session, help driving a bid for EGBs, with soft Canadian CPI and a solid 30Y Gilt auction also tailwinds.
  • EGB periphery spreads narrowed, led by 10Y BTP/Bund which posted its tightest close since mid-March amid multiple reports detailing the Italian government's fiscal consolidation plans.
  • UK instruments outperformed German counterparts across most of their respective curves, with 10Y outperforming on the UK curve in a bull flattening move, and 5Y on the German curve.
  • Thursday's ECB meeting remains the key event of the week, but Wednesday's early highlight is UK CPI - MNI's preview is here (PDF).

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

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European yields fell sharply Tuesday, as oil prices and equities pulled back.

  • Early gains came largely after an overnight drop in crude oil on Israel-Iran de-escalation.
  • UK labour market data didn't suggest any firm conclusions for BoE policy (regular pay moderated while the quantity side of the data held up), while  the German ZEW investor survey beat on expectations, but missed on current situation.
  • Multiple negative earnings headlines across tech (ASML) and European luxury (LVMH) weighed heavily on European equities in the session, help driving a bid for EGBs, with soft Canadian CPI and a solid 30Y Gilt auction also tailwinds.
  • EGB periphery spreads narrowed, led by 10Y BTP/Bund which posted its tightest close since mid-March amid multiple reports detailing the Italian government's fiscal consolidation plans.
  • UK instruments outperformed German counterparts across most of their respective curves, with 10Y outperforming on the UK curve in a bull flattening move, and 5Y on the German curve.
  • Thursday's ECB meeting remains the key event of the week, but Wednesday's early highlight is UK CPI - MNI's preview is here (PDF).

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

Keep reading...Show less