EGBs-GILTS CASH CLOSE: Bunds And BTPs Rally As Lagarde "Isn't Tapering"

Bunds rallied and BTPs outperformed as the ECB decision came basically in line with expectations, with the Governing Council set to "moderately lower" the PEPP purchase pace.

• As Pres Lagarde put it in the press conference, "the lady isn't tapering" - and Bund and BTP yields fell the most in months. BTP 10Y spreads narrowed to tightest since Aug 16 (102.1bp).
• There was a mild retracement near the cash close as Reuters cited sources saying the agreed PEPP target was E60-70B, which was in line with expected but perhaps dashing some lingering dovish hopes.
• Gilts strengthened but underperformed eurozone bonds.
• Friday's docket includes UK July GDP and appearances by ECB's Lagarde and Villeroy.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 1.5bps at -0.711%, 5-Yr is down 2.9bps at -0.661%, 10-Yr is down 3.8bps at -0.361%, and 30-Yr is down 3.9bps at 0.128%.
• UK: The 2-Yr yield is up 1.4bps at 0.224%, 5-Yr is up 1.4bps at 0.411%, 10-Yr is down 0.8bps at 0.736%, and 30-Yr is down 1.7bps at 1.063%.
• Italian BTP spread down 4.4bps at 103.1bps / Spanish down 2.5bps at 66.4bps