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BONDS: EGBs-GILTS CASH CLOSE: Short-End Craters On US Jobs, BoE Pill

BONDS
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European curves bear flattened Friday, with Gilts underperforming.

  • Commentary by BoE chief economist Pill was seen as more hawkish than Governor Bailey's in the prior session - while he appeared less hawkish than in previous appearances, implied BoE rates jumped as it was far from clear he would support a November cut, let alone back-to-back cuts.
  • Global bonds dropped sharply in the afternoon as the US employment report came in stronger than any analyst had expected, leading to a November Fed 50bp cut to be priced out.
  • Both the German and UK curves bear flattened amid the short-end selloff: 2Y Gilt yields registered their 4th biggest rise of the year (+17bp) - and German 2Y yields rose the most since April 2023.
  • Periphery EGB spreads tightened, led by Italy, as German yields rose and equities gained post-US payrolls on faded recession fears.
  • Next week's schedule is a little lighter from a European perspective, with German factory orders and monthly UK activity the data highlights, with multiple ECB speakers also featuring ahead of the decision the following week.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

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European curves bear flattened Friday, with Gilts underperforming.

  • Commentary by BoE chief economist Pill was seen as more hawkish than Governor Bailey's in the prior session - while he appeared less hawkish than in previous appearances, implied BoE rates jumped as it was far from clear he would support a November cut, let alone back-to-back cuts.
  • Global bonds dropped sharply in the afternoon as the US employment report came in stronger than any analyst had expected, leading to a November Fed 50bp cut to be priced out.
  • Both the German and UK curves bear flattened amid the short-end selloff: 2Y Gilt yields registered their 4th biggest rise of the year (+17bp) - and German 2Y yields rose the most since April 2023.
  • Periphery EGB spreads tightened, led by Italy, as German yields rose and equities gained post-US payrolls on faded recession fears.
  • Next week's schedule is a little lighter from a European perspective, with German factory orders and monthly UK activity the data highlights, with multiple ECB speakers also featuring ahead of the decision the following week.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

Keep reading...Show less