BONDS: EGBs-GILTS CASH CLOSE: Curves Bear Flatten With ECB October Cut Fading

Core European yields rose for the first time in 8 sessions Thursday, as the ECB meeting outcome was seen as a little less dovish than expected.

• Bunds had posted nascent gains going into the as-expected ECB decision to cut the depo rate by 25bp, but had reached session lows by the end of the press conference.
• Lagarde noted downside growth risks but did not convey any urgency to cut rates again in October, highlighting data dependence, while her commentary on Eurozone wages was read somewhat hawkishly.
• October ECB cut pricing dipped to 5bp from 8bp, and cumulative in the remaining meetings through March 2025 to 86bp from 91bp.
• The German curve bear flattened on the day, underperforming Gilts (the UK curve bear flattened in sympathy).
• Periphery EGB spreads tightened amid the pronounced backup in Bund yields and a stabilisation in equities.
• Friday's calendar is highlighted by multiple ECB speakers (Nagel, Rehn, Lagarde), but data-wise is fairly light, with French final CPI and Q2 wages, and UK BoE/Ipsos inflation expectations.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 7.3bps at 2.225%, 5-Yr is up 5.4bps at 2.025%, 10-Yr is up 3.8bps at 2.15%, and 30-Yr is up 3bps at 2.425%.
• UK: The 2-Yr yield is up 2.7bps at 3.818%, 5-Yr is up 2.5bps at 3.64%, 10-Yr is up 2bps at 3.781%, and 30-Yr is up 0.4bps at 4.376%.
• Italian BTP spread down 3.9bps at 139.1bps  / Spanish down 1.4bps at 81.1bps