EGBs-GILTS CASH CLOSE: Busy Week Finishes On Flatter Pre-Holiday Note

The UK and German curves bear flattened Thursday to end an otherwise strong holiday-shortened week, with early strength at the short end reversing toward the close.

• The session was characterised by limited volumes and few event catalysts of note.
• Softer-than-expected US data has been the driving force in markets all week, and a jobless claims reading to the high side of expectations pushed Bund and Gilt yields to session lows in a knee-jerk move in the early European afternoon.
• But the move quickly faded, in large part due to seasonal adjustment revisions at play, and global core FI retreated ahead of the long weekend - with the US nonfarm payrolls reading Friday also on traders' minds.
• Equities rallied into the close, weighing on safe havens too. Periphery spreads were fairly steady throughout the session though, widening only mildly.
• BoE terminal rate hike pricing was little changed (4.63% for Sept); ECB terminal rose 5.6bp (to 3.52%, also for Sept). Little reaction to ECB Lane's reiteration that a May hike is the baseline case (futures continued to price in 22bp, unchanged).

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 3bps at 2.554%, 5-Yr is up 0.2bps at 2.18%, 10-Yr is up 0.1bps at 2.183%, and 30-Yr is up 1.6bps at 2.282%.
• UK: The 2-Yr yield is up 3.1bps at 3.372%, 5-Yr is up 1.5bps at 3.271%, 10-Yr is up 0.4bps at 3.432%, and 30-Yr is down 0.1bps at 3.771%.
• Italian BTP spread up 1.6bps at 184.9bps / Spanish up 1.8bps at 104.5bps