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BONDS: EGBs-GILTS CASH CLOSE: Curves Steepen As ECB 50bp Cut Seen In Play

BONDS
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European curves steepened Thursday as the ECB cut rates as expected but strong US economic data put pressure on the long end of the curve.

  • The ECB decision (25bp cut) and press conference itself brought few surprises, with Lagarde noncommittal on future decisions. The usual post-meeting Bloomberg and Reuters sources stories pointed to another cut in December as likely.
  • For markets, judging from implied rates, the debate is over whether it will be 25bp or 50bp (the latter now ~16% priced vs zero pre-meeting).
  • That kept the short-end underpinned, even as much-stronger-than-expected US retail sales (and improved initial jobless claims) applied pressure on long-end Treasuries which spilled over globally.
  • On the day, the German curve twist steepened, with the UK's bear steepening.
  • Periphery EGB spreads tightened on the increasingly dovish implied ECB rate outlook.
  • Unscheduled ECB Governing Council member comments will be awaited over the next day - otherwise, on the schedule, UK retail sales data features Friday.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

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European curves steepened Thursday as the ECB cut rates as expected but strong US economic data put pressure on the long end of the curve.

  • The ECB decision (25bp cut) and press conference itself brought few surprises, with Lagarde noncommittal on future decisions. The usual post-meeting Bloomberg and Reuters sources stories pointed to another cut in December as likely.
  • For markets, judging from implied rates, the debate is over whether it will be 25bp or 50bp (the latter now ~16% priced vs zero pre-meeting).
  • That kept the short-end underpinned, even as much-stronger-than-expected US retail sales (and improved initial jobless claims) applied pressure on long-end Treasuries which spilled over globally.
  • On the day, the German curve twist steepened, with the UK's bear steepening.
  • Periphery EGB spreads tightened on the increasingly dovish implied ECB rate outlook.
  • Unscheduled ECB Governing Council member comments will be awaited over the next day - otherwise, on the schedule, UK retail sales data features Friday.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

Keep reading...Show less