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EGBs-GILTS CASH CLOSE: 50bp On ECB's Agenda For July?

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ECB's Knot sparked a bearish repricing at the front of European curves Tuesday with his comment that he would be open to a 50bp hike at the bank's July meeting.

  • Although Knot's comments could be discounted on account of his pre-existing hawkish leanings, ECB rate hike pricing for 2022 hit a cycle high, with over 100bp in hikes priced for the year (though a 25bp raise in July remains the market's base case).
  • UK yields also rose sharply, both following the EGB move and strong March wage data. 2Y Gilts sold off 20+bp.
  • Periphery EGB spreads widened but not as much as might be expected given tighter ECB policy expectations.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany:

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ECB's Knot sparked a bearish repricing at the front of European curves Tuesday with his comment that he would be open to a 50bp hike at the bank's July meeting.

  • Although Knot's comments could be discounted on account of his pre-existing hawkish leanings, ECB rate hike pricing for 2022 hit a cycle high, with over 100bp in hikes priced for the year (though a 25bp raise in July remains the market's base case).
  • UK yields also rose sharply, both following the EGB move and strong March wage data. 2Y Gilts sold off 20+bp.
  • Periphery EGB spreads widened but not as much as might be expected given tighter ECB policy expectations.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany:

Keep reading...Show less