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EGBs-GILTS CASH CLOSE: Risk-Off Rally Continues

BONDS

Bund yields continued to plummet Thursday, continuing the price action following a below-expected German inflation print Wednesday.

  • Schatz and Bobl yields erased the last three weeks' rise, with the German curve outperforming its UK counterpart.
  • Bull steepening was the common theme as rate hikes were priced out (ECB end-2022 implied rates fell 14bp, BoE -8bp), with growth fears resurfacing (commodity prices dropped sharply, European equities down 1.5-2% to end a miserable half-year).
  • BTP spreads fell to session lows on a Reuters sources report saying the ECB will buy periphery EGB bonds with proceeds from maturing core/semi-core instruments bought under PEPP. But the move eventually faded, due in part to the risk-off move overall, but also perhaps lingering doubts over whether this is a "done deal".

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

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Bund yields continued to plummet Thursday, continuing the price action following a below-expected German inflation print Wednesday.

  • Schatz and Bobl yields erased the last three weeks' rise, with the German curve outperforming its UK counterpart.
  • Bull steepening was the common theme as rate hikes were priced out (ECB end-2022 implied rates fell 14bp, BoE -8bp), with growth fears resurfacing (commodity prices dropped sharply, European equities down 1.5-2% to end a miserable half-year).
  • BTP spreads fell to session lows on a Reuters sources report saying the ECB will buy periphery EGB bonds with proceeds from maturing core/semi-core instruments bought under PEPP. But the move eventually faded, due in part to the risk-off move overall, but also perhaps lingering doubts over whether this is a "done deal".

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

Keep reading...Show less