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Gold Inching Toward Bull Trigger

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Gilts outperformed on BoE day, with the Bank defying those who had positioned for a hawkish surprise.

  • The BoE decision was in line with expectations (no change in policy, 8-1 vote to maintain QE policy, with the departing Haldane dissenting). Gilts rallied, and with Bunds stalling, the UK/ German spread is now at tightest levels since February.
  • Periphery spreads tightened slightly, led by BTPs (which had underperformed Wednesday).
  • French business confidence and German IFO data exceeded expectations.
  • The only supply was Italy selling E6bln of new 7Y CCTeu floater via syndication. Tomorrow they sell E3.75B of short-term BTP and BTPei.

German/UK Yields And 10-Yr Spreads To Germany

  • Germany: The 2-Yr yield is up 0.2bps at -0.651%, 5-Yr is down 0.1bps at -0.569%, 10-Yr is down 0.7bps at -0.185%, and 30-Yr is down 0.2bps at 0.306%.
  • UK: The 2-Yr yield is down 1.6bps at 0.073%, 5-Yr is down 3bps at 0.354%, 10-Yr is down 3.6bps at 0.744%, and 30-Yr is down 3.5bps at 1.245%.
  • Italian BTP spread down 2bps at 105.3bps /Spanish down 1.1bps at 61.7bps