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EGB/Gilt: Growth Concerns Linger


European government bonds have broadly traded firmer at the start the week while most regional equities are incrementally above the Friday close.

  • Earlier today the PBOC cut the medium-term lending rate by 10bp to 2.75% amid further signs of slowing growth with industrial production, retail sales, fixed asset growth and property investment data all coming in below expectations for July.
  • The Chinese data comes on the heels of last Friday's UK GDP data, which showed the economy sliding into recession in the second quarter.
  • Gilts have started the week on a firm footing with yields down 2-5bp and the curve bull flattening.
  • Bunds have similarly rallied with cash yields down 1-4bp.
  • Much of the OAT curve has traded above the Friday close, although the short-end has weakened slightly.
  • The BTP curve has twist flattened with the 2s30s spread narrowing 8bp,
  • Supply this morning came from Germany (Bubills, EUR2.464bn allotted) and the Netherlands (DTCs, EUR2.44bn).

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