EGBs-GILTS CASH CLOSE: Dovish BoE Helps Gilts Outperform

Core EGBs and Gilts recovered from early lows, closing mixed after digesting soft US data and a slightly dovish BoE.

• The BoE decision brought two of the dovish risks MNI had identified in advance: a 7-2 (vs the broadly expected 8-1) vote in favour of a hold, and a softer set of inflation forecasts.
• That said, the bigger global market mover was an unexpected jump in weekly US initial jobless claims to an 8-month high.
• From then on, trade was mixed, with both Bunds and Gilts retesting session lows before tilting higher into the cash close in sympathy with US Treasury gains.
• UK yields closed near the lower end of the daily trading range, with twist steepening in the curve, while German instruments finished weak with some bear steepening.
• Periphery EGB spreads widened slightly.
• Friday's calendar includes UK GDP and the accounts of the ECB's April meeting.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 0.8bps at 2.938%, 5-Yr is up 2.1bps at 2.521%, 10-Yr is up 3.3bps at 2.495%, and 30-Yr is up 5.3bps at 2.631%.
• UK: The 2-Yr yield is down 3bps at 4.279%, 5-Yr is down 2bps at 4.002%, 10-Yr is up 0.3bps at 4.142%, and 30-Yr is up 1.4bps at 4.624%.
• Italian BTP spread up 0.7bps at 134.2bps / Spanish up 0.7bps at 79.2bps