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EGBs-GILTS CASH CLOSE: Bunds Underperform As Services PMIs Surprise

BONDS

Gilts outperformed Bunds Friday in a session highlighted by much stronger-than-expected flash Services PMIs offset somewhat by weak Manufacturing readings.

  • Overall the hawkish impact from the European PMI readings was short-lived, with a strong reading in the US equivalent required to send Bund yields decisively higher with the German curve bear steepening,
  • The UK curve saw some twist flattening, with yield rises possibly restrained by a mixed-to-weak UK retail sales reading.
  • In a continuation of this week's ECB speaker theme, de Guindos and Vujcic had no discernible market impact.
  • Periphery EGB spreads were little changed on the day, as were ECB / BoE hike prospects.
  • We highlighted several sell-side BoE view changes this week following strong CPI/wage data.
  • Ratings reviews after hours Friday include Greece, Italy, France, Ireland, and the UK. Focus next week will be on prelim April euro area national PMIs.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

  • Germany: The 2-Yr yield is up 2.6bps at 2.921%, 5-Yr is up 2.9bps at 2.521%, 10-Yr is up 3.6bps at 2.481%, and 30-Yr is up 4.5bps at 2.55%.
  • UK: The 2-Yr yield is up 1.5bps at 3.746%, 5-Yr is down 0.8bps at 3.621%, 10-Yr is down 0.9bps at 3.758%, and 30-Yr is down 0.8bps at 4.097%.
  • Italian BTP spread up 0.1bps at 187.1bps / Spanish down 0.2bps at 103.9bps

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