EGBs-GILTS CASH CLOSE: Flattening Theme Continues To End The Week

The German and UK curves twist flattened Friday, continuing the recent flattening trend amid short-end/belly underperformance.

• With the ECB (next week) and BoE decisions in sight, the 2y segments on both curves resumed their recent rise. BoE peak rate pricing rose by 4bp to end a mixed but mostly hawkish week.
• An MNI Policy sources noted today, officials are converging on two more 25bp hikes, with a July increase probably following one certain for June.
• German 2s10s (-54.4bp) reached the most inverted closing level since mid-March; the UK equivalent is the most inverted since late Feb (-30.9bp).
• After hours we get a Fitch ratings review on Greece; GGB spreads tightened marginally having already outperformed Thursday. BTPs outperformed as BTP Valore sales closed with over E18bln in sales.
• Next week's calendar is very busy, with the ECB highlighting the European docket (and heavy EGB supply besides), but attention also on US inflation data and the Federal Reserve meeting, as well as the Bank of Japan decision.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany:

• Germany: The 2-Yr yield is up 2.2bps at 2.916%, 5-Yr is up 0.2bps at 2.422%, 10-Yr is down 2.5bps at 2.377%, and 30-Yr is down 4.6bps at 2.516%.
• UK: The 2-Yr yield is up 4.1bps at 4.541%, 5-Yr is up 3.8bps at 4.25%, 10-Yr is up 0.6bps at 4.239%, and 30-Yr is down 0.6bps at 4.482%.
• Italian BTP spread down 4.7bps at 173.7bps/ Greek down 0.3bps at 128.6bps