EGBs-GILTS CASH CLOSE: Eyeing A Dovish ECB Shift On Ukraine

The Russian invasion of Ukraine predictably dominated European markets Thursday with yields dropping sharply on the open, and again later in the session on signs that geopolitics could hold back central bank tightening.

• ECB hawk Holzmann said in late afternoon that the Ukraine conflict may delay the bank's exit from monetary stimulus.
• The biggest reaction came from 10Y BTP spreads which dropped 10bp immediately, reversing earlier widening. But short-end Bund yields also came off the highs they had spent most of the session clawing towards after an opening drop.
• Germany outperformed the UK, the latter seen again as potentially less directly impacted by the Ukraine crisis.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 5.7bps at -0.416%, 5-Yr is down 8bps at -0.072%, 10-Yr is down 5.6bps at 0.172%, and 30-Yr is down 2.4bps at 0.443%.
• UK: The 2-Yr yield is down 3.8bps at 1.258%, 5-Yr is down 3.5bps at 1.296%, 10-Yr is down 3.2bps at 1.447%, and 30-Yr is up 0.9bps at 1.573%.
• Italian BTP spread down 6.8bps at 164.5bps / Spanish down 2.6bps at 100.7bps