September 11, 2024 08:42 GMT
BONDS: Gilts Extend Recent Tightening Vs. Bunds
BONDS
Gilts extend their recent outperformance vs. Bunds. The presence of 10-Year German supply will be helping intraday, but there are some other factors at play.
- This week’s UK data has helped promote the idea of a swifter BoE cutting cycle, albeit centred on ’25 given the Bank’s current reluctance to commit to further easing in the immediate term.
- The SFIZ5/ERZ5 implied rate spread has narrowed by 12.5bp since the Aug 29 multi-month closing high.
- Elsewhere, the UK’s fiscal trajectory under a Labour government continues to dominate discussions, with the party’s pro-growth election preferences already being challenged in the early stages of its term.
Fig. 1: UK/Germany 5- & 10-Year Yield Spreads
![](https://media.marketnews.com/UK_Germany_Spreads110824_0b5dcd44bf.jpg)
Source: MNI - Market News/Bloomberg
Fig. 2: SFIZ5/ERZ5 Implied Rate Spread
![](https://media.marketnews.com/SFIERZ_5110924_0777e67909.jpg)
Source: MNI - Market News/Bloomberg
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