BONDS: EGBs-GILTS CASH CLOSE: Yields Dip On Outsized Fed Cut Speculation

European yields fell slightly Friday, partially reversing some of Thursday's rise.

• The main driver of Friday's gains was rising speculation over an outsized 50bp cut by the Federal Reserve next week following media reports after the European bond cash close Thursday.
• With Bund and Gilt futures having gapped higher on the re-open, gains were pared fairly steadily over the rest of the session, with the long end lagging overall as equities gained.
• Friday's session included plenty of ECB speakers following Thursday's decision, with hawk Holzmann expressing an openness to cut rates once more this year (likely in December).
• The German and UK curves bull steepened. Periphery EGB spreads tightened, reflecting a rebound in equities. Note Spain and Greece's sovereign ratings are due for review after the market close.
• Next week's Europe event risk is focused on the UK, including CPI data on Wednesday and the BoE decision Thursday, though of course the size of next Wednesday's expected Fed rate cut will be a major global driver.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 1.4bps at 2.211%, 5-Yr is down 0.5bps at 2.02%, 10-Yr is down 0.2bps at 2.148%, and 30-Yr is up 0.6bps at 2.431%.
• UK: The 2-Yr yield is down 1.8bps at 3.8%, 5-Yr is down 1.8bps at 3.622%, 10-Yr is down 1.3bps at 3.768%, and 30-Yr is down 1.7bps at 4.359%.
• Italian BTP spread down 3bps at 136.2bps / Greek down 2.2bps at 97bps