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

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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

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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

Keep reading...Show less