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EGBs-GILTS CASH CLOSE: ECB Delivers Big Hike, But Reaction Mixed

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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:

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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:

Keep reading...Show less