July 21, 2022 16:27 GMT
The German curve twist flattened Thursday, with BTP spreads widening sharply and Gilts bull flattening, as the ECB delivered a bigger-than-expected 50bp hike.
- Schatz yields spiked 15bp on the ECB decision but that move almost completely faded as forward guidance was dropped and Lagarde was noncommittal on a September hike.
- BTP spreads widened sharply in a dramatic day including the resignation of PM Draghi in the morning and the ECB's announcement of the Transmission Protection Instrument (TPI).
- Ambiguous details on TPI contributed to BTP weakness. Compounding issues for BTPs, as cash markets closed, media outlets reported the next Italian election would be held on September 25 - our Politics Team has published a briefing on what to expect next.
Closing Yields / 10-Yr Periphery EGB Spreads To Germany:
- Germany: The 2-Yr yield is up 6.9bps at 0.676%, 5-Yr is up 1.3bps at 1.024%, 10-Yr is down 3.4bps at 1.223%, and 30-Yr is down 5.1bps at 1.403%.
- UK: The 2-Yr yield is down 6.8bps at 2.001%, 5-Yr is down 6.8bps at 1.848%, 10-Yr is down 9.2bps at 2.047%, and 30-Yr is down 12.9bps at 2.531%.
- Italian BTP spread up 18.8bps at 232.2bps / Greek up 13bps at 233.7bps
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