EGBs-GILTS CASH CLOSE: Bunds Soar As Eurozone Growth Concerns Resurface

Weaker-than-expected European PMI readings boosted Gilts and Bunds Friday, with the latter outperforming as Eurozone growth concerns returned to the fore.

• German yields fell sharply in a bull flattening move after flash Eurozone June flash PMIs disappointed and showed signs of price pressures easing.
• Though UK PMIs were also on the weak side, Gilts lagged the rally slightly as UK retail sales data were solid, and BoE hike pricing continued to gain after Thursday's surprise 50bp hike.
• 2s10s German spreads fell to post-1990 lows; UK's post-2000 lows.
• After the PMI gains, Bunds traded the rest of the session with a slightly positive drift, with Gilts fading, with both finishing much stronger on the day.
• ECB's de Cos said it's not possible to anticipate the September decision at this point, especially given the weak PMI data.
• Greek spreads underperformed on the periphery, giving up some of the recent gains ahead of this weekend's elections (analysis on election implications for GGBs here).
• Next week's highlights include June inflation for multiple Eurozone countries and the ECB's Sintra forum.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 11.5bps at 3.106%, 5-Yr is down 14.7bps at 2.495%, 10-Yr is down 14.1bps at 2.353%, and 30-Yr is down 10.5bps at 2.404%.
• UK: The 2-Yr yield is up 10bps at 5.177%, 5-Yr is up 0.9bps at 4.571%, 10-Yr is down 4.7bps at 4.32%, and 30-Yr is down 3.5bps at 4.45%.
• Italian BTP spread down 1.1bps at 162.6bps / Greek up 1.2bps at 125bps