EGBs-GILTS CASH CLOSE: Bull Steeper As Central Banks Seen Less Hawkish

European curves bull steepened Thursday as central bank hikes got priced out.

• Multiple flashpoints saw implied Eurozone rates fall through the day: ECB's Schnabel commenting on growth concerns, a dovish-leaning account of the July meeting, and core August Eurozone inflation coming in around expected levels with signs of deceleration underway.
• BoE's Pill weighed in with his preference for holding rates higher for longer, as opposed to running the risk of overtightening.
• ECB peak hike pricing pulled back by 7bp and BoE by 9bp on the day.
• German instruments outperformed UK counterparts, though both saw strength in the short-end/belly. Periphery EGB spreads were largely unchanged on the day.
• Attention turns to final European PMIs Friday morning, with US nonfarm payrolls the focus later.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 9.5bps at 2.978%, 5-Yr is down 9.6bps at 2.477%, 10-Yr is down 7.9bps at 2.466%, and 30-Yr is down 5.8bps at 2.591%.
• UK: The 2-Yr yield is down 8.9bps at 5.149%, 5-Yr is down 7.3bps at 4.664%, 10-Yr is down 6.2bps at 4.36%, and 30-Yr is down 4.8bps at 4.608%.
• Italian BTP spread up 0.5bps at 165.3bps / Spanish unchanged at 101.6bps