EGBs-GILTS CASH CLOSE: Constructive Start Fades With BoE / Fed In View

Gilts gained while Bunds weakened Friday.

• European bonds enjoyed a constructive start to the session, with softer-than-expected Japanese inflation data setting the tone overnight.
• A Reuters post-ECB meeting sources pieces indicated the possibility of a dovish tweak in language at the March meeting, but the associated bid faded as most subsequent speakers came from the more hawkish end of the Governing Council spectrum.
• Global core FI fell in the afternoon following US data which showed the PCE price index roughly in line, alongside consumption strength. Bunds continued to fade into the close, while Gilts eventually recovered from near session lows.
• The German curve finished slightly bear flatter, with the UK's bull steepening, though there were few obvious headline/macro drivers to the latter's performance - with perhaps an eye to the Bank of England meeting next week.
• Periphery EGB performance was mixed, with BTP spreads tightening and Greek widening.
• Next week's schedule is very busy, including the BoE decision Thursday following the Federal Reserve's Wednesday, and flash January Eurozone inflation data alongside.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 1.6bps at 2.633%, 5-Yr is up 1.1bps at 2.198%, 10-Yr is up 0.9bps at 2.299%, and 30-Yr is up 1.5bps at 2.514%.
• UK: The 2-Yr yield is down 3.3bps at 4.352%, 5-Yr is down 2.2bps at 3.894%, 10-Yr is down 1.9bps at 3.964%, and 30-Yr is down 0.6bps at 4.588%.
• Italian BTP spread down 1.3bps at 152.4bps / Greek up 1.9bps at 102.1bps