EGBs-GILTS CASH CLOSE: Bellies Outperform As BoE/ECB Implied Hikes Fade

European yields fell Friday, with Gilts outperforming Bunds, and periphery spreads tightening.

• Curve bellies outperformed as central bank tightening was further priced out following Thursday's in-line ECB meeting, and ahead of Eurozone October inflation data and the BoE decision next week.
• Bunds traded mostly within Thursday's ranges, rebounding from early morning losses with some pointing to disinflationary dynamics in Berlin/Brandenburg state inflation released this morning (ahead of the national German print on Monday).
• As anticipation built over next week's Oct flash inflation round (MNI's preview here), and perhaps with an eye on those German state data, ECB hike pricing diminished, with <1bp of tightening seen in the rest of the cycle, and 78bp of cuts in 2024 (5bp more than seen Thurs).
• Gilts gained more or less steadily throughout the session, though like ECB pricing, BoE rates were seen 8bp lower in the year past the peak, vs what was seen Thurs.
• Periphery spreads tightened, with BTP/Bunds heading below the tightest levels seen during Thursday's ECB press conference when Lagarde noted that PEPP policy wasn't discussed by the Governing Council.
• As noted, next week's Euro inflation data (Mon-Tue) and next Thursday's BoE decision will be the focus next week.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 3.8bps at 3.037%, 5-Yr is down 4.2bps at 2.683%, 10-Yr is down 2.9bps at 2.832%, and 30-Yr is down 0.2bps at 3.124%.
• UK: The 2-Yr yield is down 4.3bps at 4.777%, 5-Yr is down 6.7bps at 4.475%, 10-Yr is down 5.3bps at 4.544%, and 30-Yr is down 4.3bps at 5.025%.
• Italian BTP spread down 3.7bps at 197.2bps / Spanish down 1.3bps at 109.5bps