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BONDS: EGBs-GILTS CASH CLOSE: Bull Steepening Continues On Soft Euro Inflation

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The German and UK curves bull steepened for a 2nd consecutive session Friday as Eurozone inflation pressures appeared softer than expected to start the year.

  • Following on from Thursday's post-ECB rally, Bunds led gains across the space as German regional and French inflation data came in softer than expected.
  • ECB implied rate cuts deepened, with around 81bp total expected by year-end (up 10bp from pre-data).
  • In other data, UK mortgage approvals were firmer than expected, with consumer credit in-line; the ECB's Survey of Professional Forecasters saw respondents revised 2025
    growth expectations down.
  • OATs notably outperformed the rest of the semi-core (and periphery) EGB space, with spreads narrowing after an apparent deal on the 2025 budget seemingly reducing near term fiscal/political risks. Periphery EGB spreads widened slightly as an intraday equity rally faded.
  • Next week's European calendar includes the BoE decision (25bp rate cut expected, along with new forecasts and a press conference) and the Eurozone-wide flash inflation print.

Closing Yields / 10-Yr EGB Spreads To Germany

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The German and UK curves bull steepened for a 2nd consecutive session Friday as Eurozone inflation pressures appeared softer than expected to start the year.

  • Following on from Thursday's post-ECB rally, Bunds led gains across the space as German regional and French inflation data came in softer than expected.
  • ECB implied rate cuts deepened, with around 81bp total expected by year-end (up 10bp from pre-data).
  • In other data, UK mortgage approvals were firmer than expected, with consumer credit in-line; the ECB's Survey of Professional Forecasters saw respondents revised 2025
    growth expectations down.
  • OATs notably outperformed the rest of the semi-core (and periphery) EGB space, with spreads narrowing after an apparent deal on the 2025 budget seemingly reducing near term fiscal/political risks. Periphery EGB spreads widened slightly as an intraday equity rally faded.
  • Next week's European calendar includes the BoE decision (25bp rate cut expected, along with new forecasts and a press conference) and the Eurozone-wide flash inflation print.

Closing Yields / 10-Yr EGB Spreads To Germany

Keep reading...Show less