EGBs-GILTS CASH CLOSE: Bunds Weaken As Political Risk Premium Dissipates

Core European instruments weakened sharply Monday, as political risk premia dissipated somewhat.

• OATs and periphery EGBs enjoyed some respite at the open after Sunday's French first-round elections went largely as expected, with the far-right RN winning the most seats but likely falling short of an absolute majority.
• German flash June inflation data was largely in line with expectations, with services CPI remaining relatively sticky but headline and overall core ticking lower.
• On the day, yields rose across all European curves, and closed near session highs.
• Both the German and UK curves bear steepened. 10Y OAT/Bund spreads fell 6bp to 74.1bp, the tightest level in over two weeks. Periphery EGB spreads tightened sharply, with BTP and GGBs narrowing over 7bp to Bunds.
• Tuesday's schedule includes the Eurozone-wide June flash HICP print (MNI sees modest downside risks to the 2.5% consensus headline expectation) and final PMIs, as well as ECB and other speakers at the Sintra forum.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 9.1bps at 2.924%, 5-Yr is up 10.6bps at 2.588%, 10-Yr is up 10.7bps at 2.607%, and 30-Yr is up 10.4bps at 2.795%.
• UK: The 2-Yr yield is down 2.3bps at 4.198%, 5-Yr is up 8.6bps at 4.11%, 10-Yr is up 10.9bps at 4.281%, and 30-Yr is up 11.6bps at 4.775%.
• Italian BTP spread down 7.4bps at 149.8bps / Greek down 7.8bps at 117.5bps