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EGBs-GILTS CASH CLOSE: Bull Steepening In Pre-Weekend Risk Off Move

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European curves bull steepened Friday amid strong gains at the short-end, with central bank hikes continuing to get priced out after the ECB meeting yesterday and ahead of the Fed and BoE decisions next week.

  • After a fairly quiet start to the European session, highlighted by ECB hawks eyeing further rate hikes sending EGB yields marginally higher, safe havens began rallying as bank stocks dropped sharply throughout the rest of the day.
  • There was no specific trigger, more a resumption of concerns over Credit Suisse and US banks, with angst over possible developments over the weekend. Reuters reported Credit Suisse executives would meet over the weekend to discuss options for the bank's future.
  • ECB terminal rate pricing fell back 12bp to 3.20%; a 25bp BoE hike next week is less than 50% priced, with terminal dropping as much as 23bp to 4.17%.
  • After initially tightening, periphery EGB spreads widened as equities pulled back.
  • With a quiet schedule Monday (ECB Lagarde appearance aside), attention over the weekend will continue to be paid to banking sector risks.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

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European curves bull steepened Friday amid strong gains at the short-end, with central bank hikes continuing to get priced out after the ECB meeting yesterday and ahead of the Fed and BoE decisions next week.

  • After a fairly quiet start to the European session, highlighted by ECB hawks eyeing further rate hikes sending EGB yields marginally higher, safe havens began rallying as bank stocks dropped sharply throughout the rest of the day.
  • There was no specific trigger, more a resumption of concerns over Credit Suisse and US banks, with angst over possible developments over the weekend. Reuters reported Credit Suisse executives would meet over the weekend to discuss options for the bank's future.
  • ECB terminal rate pricing fell back 12bp to 3.20%; a 25bp BoE hike next week is less than 50% priced, with terminal dropping as much as 23bp to 4.17%.
  • After initially tightening, periphery EGB spreads widened as equities pulled back.
  • With a quiet schedule Monday (ECB Lagarde appearance aside), attention over the weekend will continue to be paid to banking sector risks.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

Keep reading...Show less