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EGBs-GILTS: Bund Flattening Reverses

BONDS

Bunds and Gilts weakened all morning but rebounded in the afternoon as equities headed down. Geopolitical risk (Afghanistan headlines) and weak China economic data weighed on risk appetite.

  • The Gilt curve bear flattened, but Bunds notably reversed early flattening (5s30s hit lowest since early Feb) to end steeper. Most yields changed across the UK and German curves.
  • Periphery spreads widened, but narrowed vs widest levels in mid-afternoon. BTPs underperformed.
  • UK said it would sell a 2nd Green Gilt in October, following the 1st in September.
  • No data flow today, but picks up Tuesday with UK and Eurozone employment numbers, and Eurozone 2Q prelim GDP. Also Tuesday, UK sells GBP2bln of Jan-46 Gilt and Germany sells E6bln of Schatz.
Closing Yields / 10-Yr Periphery EGB Spreads To Germany
  • Germany: The 2-Yr yield is unchanged at -0.739%, 5-Yr is up 0.3bps at -0.727%, 10-Yr is down 0.2bps at -0.469%, and 30-Yr is up 0.2bps at -0.02%.
  • UK: The 2-Yr yield is up 0.8bps at 0.144%, 5-Yr is up 0.7bps at 0.302%, 10-Yr is unchanged at 0.573%, and 30-Yr is unchanged at 0.961%.
  • Italian BTP spread up 2.1bps at 103.4bps / Spanish up 0.8bps at 69.3bps
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