September 24, 2024 17:17 GMT
BONDS: EGBs-GILTS CASH CLOSE: German Short End Rallies Again
BONDS
The core EGB short-end rally continued Tuesday, with 2Y German yields seeing the lowest close since Dec 2022 on deepening central bank easing prospects.
- EGBs and Gilts weakened in early trade, weighed down by news overnight that China was enacting economic stimulus measures.
- Another soft German data point in September IFO failed to have much of a positive bond impact.
- But global core FI rallied in the European afternoon, with a weak US consumer confidence reading boosting Treasuries, and Bunds/Gilts on the follow.
- ECB October rate cut expectations continue to ratchet up amid the poor survey data this week: now priced at 60% implied of 25bp, vs 40% at Monday's close (post-PMIs) and 20% to start the week. BoE Nov cut pricing (last up 1bp at 30bp, or 25bp + 20% of a 50bp cut) deepened less dramatically.
- Bunds outperformed Gilts, with the German curve bull steepening. The UK curve bear steepened modestly.
- Periphery EGB spreads tightened, with a broader risk-on move keyed by the China stimulus.
- Wednesday's docket includes an appearance by BoE's Greene, French consumer confidence, Spanish PPI, and the Riksbank decision (MNI preview here).
Closing Yields / 10-Yr Periphery EGB Spreads To Germany
- Germany: The 2-Yr yield is down 5.2bps at 2.097%, 5-Yr is down 3.2bps at 1.968%, 10-Yr is down 0.8bps at 2.148%, and 30-Yr is down 0.2bps at 2.479%.
- UK: The 2-Yr yield is up 0.3bps at 3.918%, 5-Yr is up 1.8bps at 3.772%, 10-Yr is up 1.8bps at 3.941%, and 30-Yr is up 1.9bps at 4.515%.
- Italian BTP spread down 2bps at 133.2bps / Spanish down 1bps at 78.7bps
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