EGBs-GILTS CASH CLOSE: Core FI Gains On Dovish Central Bank Developments

Short-end UK instruments outperformed German counterparts Thursday following a dovish BoE decision, but long-end Bunds outperformed Gilts.

• European FI started on the front foot following the dovish Fed late Wednesday, with further upside early in the session spurred by a surprise rate cut by the SNB and softer-than-expected Eurozone flash manufacturing data (UK PMIs were mixed and had little impact).
• The BoE decision brought a significant dovish shift, including no more hawkish dissenters, and Gilts hit session highs.
• In the afternoon, gains retraced as US data came in on the strong side and the US dollar and stocks strengthened.
• The UK curve twist steepened on the day, with Germany's bull steepening. Periphery spreads tightened, but closed off intraday tights.
• Friday's schedule includes UK retail sales and German IFO data, with multiple ECB speakers including Nagel, Holzmann, and Lane.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 5bps at 2.875%, 5-Yr is down 4.1bps at 2.405%, 10-Yr is down 2.7bps at 2.405%, and 30-Yr is down 1.1bps at 2.578%.
• UK: The 2-Yr yield is down 5.6bps at 4.178%, 5-Yr is down 3.7bps at 3.878%, 10-Yr is down 2.1bps at 3.995%, and 30-Yr is up 1.4bps at 4.493%.
• Italian BTP spread down 1.1bps at 127bps / Spanish down 0.9bps at 80.6bps