EGBs-GILTS CASH CLOSE: Curves Bear Flatten As Bank Fears Subside

The UK and German curves bear flattened Monday with the latter underperforming, as weekend headlines propped up confidence in the US banking sector.

• First Citizens' takeover of Silicon Valley Bank and a Bloomberg sources piece ("US Mulls More Support for Banks While Giving First Republic Time") drove European equities and yields higher in early trade, with US bank stocks soaring at the US cash open.
• Rates continued rising in early afternoon on BBG sources story saying Exec Board's Schnabel pushed for a clearer signal in the ECB's March statement on further rate hikes.
• This continued to pressure the short end, with the implied ECB rate hike path seeing near 90% chance of a 25bp raise in May, and just over 50bp cumulative left in the cycle (vs 60% and 20bp at Friday's lows, respectively).
• A beat in German IFO kept sentiment bearish, but didn't really move the needle.
• The bear flattening move petered out a little by mid-afternoon as global bank stocks gave up some of their earlier gains. 10Y BTP spreads likewise failed to decisively break through the 183bp mark vs Bunds.
• BoE Gov Bailey speaks after the cash close, while the schedule early Tuesday includes appearances by ECB hawks Rehn and Muller, and French confidence surveys.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 12.8bps at 2.521%, 5-Yr is up 11.2bps at 2.211%, 10-Yr is up 9.8bps at 2.227%, and 30-Yr is up 9bps at 2.308%.
• UK: The 2-Yr yield is up 10bps at 3.311%, 5-Yr is up 9.2bps at 3.219%, 10-Yr is up 8.3bps at 3.366%, and 30-Yr is up 3.9bps at 3.807%.
• Italian BTP spread down 4.4bps at 183.7bps / Greek down 7.8bps at 188bps