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EGBs-GILTS CASH CLOSE: Caught Between US Data Points, Bunds Underperform

BONDS

The German curve bear flattened Monday, with the belly underperforming on the UK curve.

  • Stronger-than-expected German industrial production data continued the negative tone for European core FI set after Friday's robust US jobs data. While there was little otherwise in the way of newsflow or macro developments Monday, focus was firmly on hawkish risks from the upcoming US CPI reading on Wednesday.
  • Bunds underperformed Gilts, with notable underperformance of the German short end (though ECB cut pricing was little changed on the day).
  • Periphery EGB spreads closed tighter, as equities clawed back some of Friday's losses.
  • Our latest Europe Pi showed broad short-setting across the futures space last week, with BTP structural positioning moving into short territory.
  • MNI's preview of Thursday's ECB meeting was published today (PDF). With limited expectations of the ECB changing tack ahead of a presumptive June cut, any adjustment to the official communication this week would represent a minor surprise.
  • Overnight we get UK BRC retail sales, while Tuesday brings the ECB Bank Lending Survey, and supply from Austria, Belgium, and Germany.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

  • Germany: The 2-Yr yield is up 5.2bps at 2.927%, 5-Yr is up 5.1bps at 2.441%, 10-Yr is up 3.6bps at 2.435%, and 30-Yr is up 1.6bps at 2.586%.
  • UK: The 2-Yr yield is up 1bps at 4.234%, 5-Yr is up 2.3bps at 3.946%, 10-Yr is up 1.6bps at 4.085%, and 30-Yr is up 1.4bps at 4.591%.
  • Italian BTP spread down 2.4bps at 139.4bps / Spanish bond spread down 1.8bps at 81.7bps

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