EGBs-GILTS CASH CLOSE: Bull Steepening As Hike Pricing Fades

EGBs and Gilts saw strong bull steepening Thursday as Wednesday's dovish Fed decision pulled down European central bank hike pricing.

• The BoE delivered a modest hawkish surprise with its 25bp hike on a 7-2 vote today. But the initial jump in terminal rate pricing of about 6bp faded over the course of the session with the focus on BoE's expectation for inflation to fade.
• Peak Bank Rate pricing dropped 16bp on the day, including 4bp compared with just before the BoE decision (just another 30bp of hikes are seen).
• ECB hike pricing faded along the same lines (terminal -10bp vs pre-Fed), with various hawks (including Muller) sounding half-hearted about future raises.
• Norges Bank and the SNB hiked by 25bp and 50bp respectively as expected.
• Periphery spreads edged wider with risk assets flat on the session.
• Little let-up ahead with UK retail sales data first thing Friday morning, followed by flash March PMI figures across Europe.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 18.1bps at 2.526%, 5-Yr is down 17.4bps at 2.198%, 10-Yr is down 13.3bps at 2.195%, and 30-Yr is down 7.2bps at 2.251%.
• UK: The 2-Yr yield is down 19.9bps at 3.295%, 5-Yr is down 15.9bps at 3.215%, 10-Yr is down 9.1bps at 3.36%, and 30-Yr is down 5.3bps at 3.833%.
• Italian BTP spread up 2.9bps at 187.1bps / Greek up 6.5bps at 195.2bps