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BONDS: EGBs-GILTS CASH CLOSE: Expansionary PMIs Bear Flatten German Curve

BONDS
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The German curve bear flattened Friday, with Bunds underperforming Gilts as regional PMIs came in stronger than expected.

  • Yields jumped in early trade as German and Eurozone composite PMIs unexpectedly returned above the 50.0 mark in the January flash reading, with the UK's and France's also exceeding expectations (driven by manufacturing beats).
  • Core Fi recovered slightly in mid-afternoon trade as US PMIs missed expectations on the headline measures, but expectations and inflation subindices muted the reaction.
  • All in all it was a less volatile week for the space by recent standards, with 10Y Bund yields up 3.4bp and Gilt down 3.1bp; the German curve bear flattened on the week with the UK's bull steepening.
  • Periphery EGBs spreads tightened early but widened in the afternoon as the equity rally fades, with Greece outperforming on the day.
  • The ECB decision (25bp cut is 97% priced) and January Eurozone flash inflation prints are next week's focus.

Closing Yields / 10-Yr EGB Spreads To Germany

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The German curve bear flattened Friday, with Bunds underperforming Gilts as regional PMIs came in stronger than expected.

  • Yields jumped in early trade as German and Eurozone composite PMIs unexpectedly returned above the 50.0 mark in the January flash reading, with the UK's and France's also exceeding expectations (driven by manufacturing beats).
  • Core Fi recovered slightly in mid-afternoon trade as US PMIs missed expectations on the headline measures, but expectations and inflation subindices muted the reaction.
  • All in all it was a less volatile week for the space by recent standards, with 10Y Bund yields up 3.4bp and Gilt down 3.1bp; the German curve bear flattened on the week with the UK's bull steepening.
  • Periphery EGBs spreads tightened early but widened in the afternoon as the equity rally fades, with Greece outperforming on the day.
  • The ECB decision (25bp cut is 97% priced) and January Eurozone flash inflation prints are next week's focus.

Closing Yields / 10-Yr EGB Spreads To Germany

Keep reading...Show less