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BONDS: EGBs-GILTS CASH CLOSE: Rate Cut Pricing Ratchets Up

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EGBs and Gilts enjoyed a late rally Thursday, with modest early weakness giving way. 

  • While there was relatively little in the way of European macro developments (Eurozone industrial production and Q3 GDP were not market movers), and the US data leaned hawkish (above-expected PPI, below-expected jobless claims), EGBs and Gilts rallied late to close stronger as the US dollar moved from session highs and US equities retraced.
  • Rate cut expectations ratcheted up: vs Wednesday's close, there's now 10bp more ECB cuts projected through September 2025 (a cumulative 144bp from current levels) and 6bp more for the BOE (63bp from current levels).
  • The belly outperformed on a twist-steepeniUK curve, with the German curve bull steepening.
  • Periphery EGB spreads fell sharply, with the move accelerating into the close as European equities held on to early gains.
  • BOE's Bailey speaks after the cash close. Friday's early highlight is UK monthly activity data, with appearances later in the session by ECB's Lane and Panetta.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

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EGBs and Gilts enjoyed a late rally Thursday, with modest early weakness giving way. 

  • While there was relatively little in the way of European macro developments (Eurozone industrial production and Q3 GDP were not market movers), and the US data leaned hawkish (above-expected PPI, below-expected jobless claims), EGBs and Gilts rallied late to close stronger as the US dollar moved from session highs and US equities retraced.
  • Rate cut expectations ratcheted up: vs Wednesday's close, there's now 10bp more ECB cuts projected through September 2025 (a cumulative 144bp from current levels) and 6bp more for the BOE (63bp from current levels).
  • The belly outperformed on a twist-steepeniUK curve, with the German curve bull steepening.
  • Periphery EGB spreads fell sharply, with the move accelerating into the close as European equities held on to early gains.
  • BOE's Bailey speaks after the cash close. Friday's early highlight is UK monthly activity data, with appearances later in the session by ECB's Lane and Panetta.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

Keep reading...Show less