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BONDS: EGBs-GILTS CASH CLOSE: Gilts Underperform On BoE's "Gradual"ism

BONDS
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Gilts underperformed global peers Thursday following the Bank of England decision.

  • Longer-end yields gapped higher on the cash re-open, following the Federal Reserve's semi-surprise 50bp cut Wednesday night offset by a message from Chair Powell that the FOMC is not in a rush to cut rates.
  • Gilts led a sell-off at 1200UK time on the BoE decision, which along with the expected rate hold (and not unexpected 8-1 vote split), brought scrutiny on the BoE's use of the word "gradual" regarding further cuts. MNI did not regard this as a significant hawkish signal but some analysts speculated that it meant a slower pace of easing.
  • A lower-than-expected US jobless claims number extended the sell-off in early afternoon European trade.
  • Earlier, the Norges Bank held rates as fully expected, with little broader spillover.
  • The UK curve bear steepened, with Germany's twist steepening. Periphery EGB spreads tightened, led by BTPs.
  • Friday sees UK retail sales data, German PPI, and various confidence surveys, as well as a speech by ECB's Lagarde. The Bank of Japan will garner attention overnight (with no policy change expected, eyes are on guidance - preview here). 

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

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Gilts underperformed global peers Thursday following the Bank of England decision.

  • Longer-end yields gapped higher on the cash re-open, following the Federal Reserve's semi-surprise 50bp cut Wednesday night offset by a message from Chair Powell that the FOMC is not in a rush to cut rates.
  • Gilts led a sell-off at 1200UK time on the BoE decision, which along with the expected rate hold (and not unexpected 8-1 vote split), brought scrutiny on the BoE's use of the word "gradual" regarding further cuts. MNI did not regard this as a significant hawkish signal but some analysts speculated that it meant a slower pace of easing.
  • A lower-than-expected US jobless claims number extended the sell-off in early afternoon European trade.
  • Earlier, the Norges Bank held rates as fully expected, with little broader spillover.
  • The UK curve bear steepened, with Germany's twist steepening. Periphery EGB spreads tightened, led by BTPs.
  • Friday sees UK retail sales data, German PPI, and various confidence surveys, as well as a speech by ECB's Lagarde. The Bank of Japan will garner attention overnight (with no policy change expected, eyes are on guidance - preview here). 

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

Keep reading...Show less